The Beginner’s Guide to Cryptocurrency
Kala is making cryptocurrency accessible to the masses, so we’re here to help you understand more about this new world.
Here are some basic terms to get you up and running, and help you get involved before it’s too late!
Cryptocurrency is digital currency that is encrypted (encoded), and stored in a decentralized format across the web. This means that rather than currency being stored and supported by a third party bank, cryptocurrency is public, and can be used by anyone with access to the internet.
Some things to understand about cryptocurrency:
- Digital means of exchange
- Accessible to anyone with internet access
- Accessible even with limited access to financial institutions
- Regulated by the public rather than a central banking system
- Transaction information is kept private (will not reveal your name, location, or the reason for transaction)
- Verified in digital public ledgers called blockchains
- Stored and transferred in a private, digital wallets
More Terms to Understand Cryptocurrencies
Blockchains are the public, digital ledgers which record and verify all cryptocurrency transactions. Anytime a new transaction comes through, it is added on as a new “block” or link to this chain, which is verified again and again as new transactions join the chain.
It is important to note that blockchain transactions are permanent, and once they’ve been verified, they cannot be changed, reversed, or removed. But, by using public eyes and software to continuously verify these ledgers, blockchains ensure that no duplicate or fraudulent transactions are made.
Cryptocurrency Exchanges are platforms that allow users to buy, sell, or trade cryptocurrency. Popular exchange websites like Coinbase, Kraken, and Shapeshift help users set up virtual wallets, track exchange rates, and manage their cryptocurrency through an online account.
Hashpower (also known as “hash rate”) is the speed at which transactions are verified on the blockchain.
Mining is the process of verifying transactions on the blockchain. Mining often requires expensive, specialized equipment and large amounts of power. This is challenging for individuals to do on their own, so there are mining pools to help them get involved. By joining these pools, users allow their computers to solve complex algorithms to help verify the blockchain.
Miners take the place of third-party banks that would typically verify all transactions in the real world. However, miners to do not hold your funds like banks do, and can earn cryptocurrency in return for their efforts.
P2P (Peer-to-peer) is the process of passing information directly from one computer (peer) to another, without needing to pass through a central location. This is one of the most successful aspects of cryptocurrency as it expedites the transaction process, and does not limit users without access to financial institutions or third-party entities.
Proof of Stake is the framework in which a user’s stake determines how much say they have in verifying each blockchain. Therefore, users who have more stakes can then have more power in determining which blocks are approved or denied.
Proof of Work is the process by which miners are rewarded for their work to verify the blockchain. Often, there is a competition between miners to verify transactions, as rewards are earned by solving each complex algorithm.
Tokens are used to transfer or pay through cryptocurrency, and represent just about any asset that has worth and can be traded. While the word “currency” can often be misleading, it is good to note that cryptocurrency tokens can represent anything from loyalty points, to digital goods, rewards, or even other cryptocurrencies.
Don’t wait to get involved in this booming market! To learn more about cryptocurrency and how Kala is unique, click here.
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