So, What exactly is a Bitcoin and Cryptocurrency? Cryptocurrency is a form of digital money which has no physical form. Unlike traditional fiat currencies (pound, euro, dollar, etc) true decentralised cyrptocurrencies are not issued by any government.
Instead, they are released as open source software that anyone with a computer, tablet, or smart phone can easily participate in.
Cryptocurrencies can be thought of as a ‘digital cash’. Bitcoin (BTC) was the original and still the most well known example of this. Like cash its peer-to-peer, it allows anyone to transact with anyone else but with the added benefit of being digital. This means transactions can take place across the world without any intermediary or third party to facilitate or give permission.
As there are no banks, or third party payment processors cryptocurrency transactions are very cheap and fast when compared to traditional means of money transfer. Sometimes free.
Bitcoin transactions are also totally permissionless, this means that anyone can transact with anyone else anywhere in the world without the permission of banks or governments. This has huge potential for a large proportion of the world population who live with failing economies and authoritarian leaders.
Since the first bitcoin was mined in January 2009 there has been some amazing innovation within the cryptocurrency space. Huge steps have been made to drive forward decentralisation.
The short video below explains in slightly more detail how the Bitcoin network works and how transactions are validated.
Other projects like Ethereum are becoming more than just a peer-to-peer digital payment system. Ethereum is a decentralised virtual machine capable of running code and executing digital contracts without any intervention from a trusted party.
Today, there are thousands of cryptocurrencies in circulation. Cryptocurrencies which are not bitcoin are often referred to as alt coins. There are some great resources to learn more about alt coin projects, we recommend checking out upfolio.com for a great summary of some of the more common ones, and messari.io for a more comprehensive list.
Whilst some of these have real potential, genuine use case, and some fantastic developers and programmers working on them, others are scams and/or have no real purpose. Its important to do your own research before investing in any cryptocurrency.
Buying cryptocurrency as a speculative investment is high risk, NEVER INVEST WHAT YOU CAN’T AFFORD TO LOSE.