EurekaPro Beginner’s Guide to Crypto

EUREKAPRO BEGINNER’S GUIDE TO CRYPTO

What is Fiat?

Fiat money is currency that a government has declared to be legal tender, but is not backed by a physical commodity. All of its value is determined by a variety of factors outside of a physical commodity including supply and demand, economic performance, and national credit.

HOW DOES FIAT
RETAIN ITS VALUE?

The government maintains that value, using its centralized powers as tools to bolster or slow down the economy when appropriate. As opposed to gold, silver, or any other commodity-backed currency, fiat is an alternative which provides much more stability and is intrinsically valueless. Most countries use paper-based fiat and maintain its value by protecting against fraud, counterfeiting, and money supply problems.

HISTORY OF FIAT

Because it’s not linked to any physical reserves of commodities, fiat money runs the risk of becoming completely worthless if hyperinflation was to occur. If people lose faith in a nation’s paper currency, the money will no longer hold any value.

What is Cryptocurrency?

Cryptocurrency is a digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets.

Fiat vs Crypto

Fiat currency is “legal tender” backed by a “central government” while cryptocurrency is not “legal tender” and is not backed by a central government or bank (it is decentralized and global).

Why Cryptocurrency?

Due to the secure nature of blockchain, which makes it possible to request and confirm transfers from your smartphone or another device without having to spend time jumping through hoops with your bank. As supply is capped, cryptocurrency increases in value as more people enter the market for them. Basic supply and demand models support this as a deflationary currency by nature, unlike any other currency out there. As such, many have pointed to cryptocurrency as being the future of finance given its decentralized nature.

What is Bitcoin?

Bitcoin (BTC) is first of the cryptocurrencies introduced to the world. It is also currently the dominant currency (aka coin) in the crypto-market.

Bitcoin Facts & Figures

There will only be 21 million BTC in circulation. To date, more than 16 mil BTC have already been mined.

If you lose your private key, you lose the Bitcoins tied to it forever. To date, a staggering 25% of all bitcoins (5.25 mil BTC) is estimated to be forever lost.

1 BTC can be further broken down into units called Satoshi. 1 Satoshi = 0.00000001 BTC / 1 BTC = 100,000,000 Satoshi.

What is Ethereum?

Ethereum is basically just like Bitcoin, but with added capabilities. While the Bitcoin blockchain simply stores records of balances and transactions, the Ethereum platform allows decentralized apps (aka dapps) and smart contracts to be built and run on it.

Ethereum Facts and Figures

Ethereum was created in 2014 by Vitalik Buterin. The cryptocurrency associated with the Ethereum platform is called Ether. Just like Bitcoin, it can be traded and used for purchases.

As of June 2018, total supply crossed the 100 million mark: this means there is more than 100 million Ether in circulation.

In the beginning, Ethereum was the most widely-used blockchain platform for creating smart contracts. After all, this capability one of the major development goals of Ethereum. The Bitcoin protocol has since evolved, and is now able to support smart contracts. While smart contract functionality for Bitcoin is not yet as extensive as that of Ethereum, some may prefer it as it still allows the implementation of smart contracts without the security and privacy risks of the more complicated platform, Ethereum.

Beyond Bitcoin – Altcoins

‘Altcoin’ is essentially the combination of the two words – ‘alternative’ and ‘coin’ (signifying cryptocurrency). It is used to refer to all cryptocurrency that is alternative to Bitcoin.

Current popular altcoins include:
Ethereum
– 2nd to Bitcoin in market capitalization as of early 2018
Litecoin – seen as Bitcoin’s closest competitor
Ripple – based around the XRP Ledger
Dogecoin – created as a joke, but soon adopted by Shiba Ibu fans the world over.

After Bitcoin’s success, many altcoins emerged in an attempt to imitate that success. Many of these altcoins are developed on the basic framework provided by Bitcoin, but with various tweaks in an attempt to improve upon the Bitcoin platform. For example, Litecoin allows for shorter approval times for mining transactions (2.5min vs 10min), and has a total minable pool of 84mil coin (compared to Bitcoin’s 21mil).

Why Shit(coin) Happens

Since Bitcoin, more than a thousand altcoins have been created. However, not all of them achieve success, due to lack of interest and implementation. When that happens, the altcoin becomes worthless – and becomes labelled as ‘shitcoin’.

Why Use Cryptocurrencies?

Cryptocurrency is revolutionary as it provides many possibilities that fiat currency (aka traditional money) cannot offer. Let’s take a look at some of the benefits of cryptocurrency.

DECENTRALIZED SYSTEM

One of the main aims in the creation of Bitcoin was to ensure that the currency is independent from any governing authorities. Every single user of Bitcoin will play a part in maintaining the blockchain. This gives users total control over their finances.

ANONYMOUS

One only needs a digital wallet to transact with cryptocurrency. No need to provide a significant amount of personal information to banks in order to engage their services.

TRANSPARENT

Since every transaction is recorded in the blockchain, all cryptocurrency movement can be traced. Any erroneous or fraudulent input can also be easily spotted and corrected.