By now you’ve probably heard the term cryptocurrency a million times. However that does little to answer exactly what it is or what it does. Despite its popularity around the world, not much is truly known about what cryptocurrency is. Luckily, Peak Digital Prospecting is here to help answer any questions you may have about the world of cryptocurrency.
What It Is
Cryptocurrency is one of those things that’s easy to learn but much harder to master, like skiing or putting on pants without losing your balance. Crudely stated, cryptocurrency is money that’s online and given a value depending on encryption techniques, or how hard it is to “mine” it. Mining is just what it sounds like, digging through encryption codes to retrieve the cryptocurrency. Because cryptocurrency isn’t regulated by a bank, government, or company, the value of the currency and each different type of “coin” (i.e. Bitcoin, Ethereum, Dogecoin, etc.) is going fluctuate.
The currency is constantly changing, somewhat similar to stocks, so it’s hard to gain an idea about what each one is currently worth. The best way to describe cryptocurrency is that it’s a nontraditional (i.e. U.S. dollars, Euros, gold, etc.) monetary source that’s completely based online and can only be mined by certain ways. So if you bought a physical “Bitcoin” from some guy on the sidewalk, it’s fake and you most likely overpaid for a painted piece of metal.
How To Mine It
This isn’t your grandpa’s kind of mining, this is the new age, computer era of mining. Every kind of cryptocurrency is mined online, there are no physical coins, dollars, or anything you can hold other than a screenshot of your cryptocurrency on your phone. With most cryptocurrencies, there are a finite number of coins available. Because all cryptocurrency is heavily encrypted, this is to preserve anonymity from buyer and seller, this monetary source is quite secure. Obtaining the coins from a certain source is called a transaction, and all transactions are recorded on things called blocks.
The blocks only record how many coins are in a certain transaction, not recording who they belong to or where they’re located. When the maximum number of coins are obtained from the transaction, the block is added to what’s known as the chain, which is a viewable record of the amount of each coin transaction in a certain block. Decrypting these blocks takes a lot of computing power and prowess. Miners get paid on how much work their hardware did to extract these blocks, so the more math you and your computer do the more money you make. This work helps make the system the miners are working on more secure as it becomes even more encrypted and harder to hack with each transaction. So, long story short, the decryption and the addition of cryptocurrency to publicly viewable blockchains is what cryptocurrency mining is.
Why It’s Important
All currency everywhere is given a monetary value by someone or by some governing body. Physical currency, like dollars and cents, are backed by gold reserves by certain countries. The dollar or coin you hold in your hand is basically an I.O.U. from a government that says “Yes, this piece of paper or metal coin is with worth this much in gold.” However, through history, we’ve learned that the value of money and the gold that backs it can go down greatly through things like stock markets crashing, war, countries’ overall credit scores going down, etc. Cryptocurrency doesn’t rise and fall like physical currency, it’s based off of other factors that allow it to rise and fall. Cryptocurrency has actually been around for a little under a decade now, steadily gaining popularity throughout the years, and doesn’t currently show any sign of slowing down.
If you’re looking for cryptocurrency or Bitcoin mining servers, Peak Digital Prospecting is here to help. We hope this blog has helped you understand cryptocurrency and how it’s mined. Learn more about Peak Digital Prospecting, learn how PDP can help you mine cryptocurrency, or contact us to answer any questions you may have about our company.