What is Crypto or Digital Currencies?

Cryptocurrency is a form of digital money that is designed to be secure and, in many cases, anonymous.

It is a currency associated with the internet that uses cryptography, the process of converting legible information into an uncrackable code, to track purchases and transfers. Cryptography was born out of the necessity for secure communication in the Second World War. It has evolved in the digital era with elements of mathematical theory and computer science to become a way to secure communications, information and money online.

What is a Satoshi?

Unlike the physical versions of global currencies (fiat), such as the USD, GBP or EURO, Cryptocurrencies predominately exist in the digital world. Despite this difference, a Cryptocurrency can be divided into smaller units, just as the pound is broken into pence and the dollar into cents. In the case of Bitcoins, the smallest unit available is called the Satoshi. The Satoshi unit is named after Satoshi Nakamoto, who published a paper in 2008 that jumpstarted the development of the Bitcoin Cryptocurrency. The paper, “Bitcoin: A Peer-to-Peer Electronic Cash System”, described the use of a peer-to-peer network as a solution to the problem of double-spending. The problem – that a digital currency or token can be used in more than one transaction – is not found in physical currencies, as a physical bill or coin can, by its nature, only exist in one place at a single time. Since a digital currency does not exist in the physical space, using it in a transaction does not remove it from someone’s possession.

While not part of a major currency pair, Bitcoins can be converted to and from other currencies. Bitcoin exchanges exist in order to allow individuals to conduct transactions. This involves depositing dollars, pounds, or other supported currencies into an account in one of the exchanges, where the balance can be used to buy or sell Bitcoins and ultimately convert them into other currencies. Just as with the exchange rates between established currencies, the value of Bitcoins will fluctuate according to supply and demand.

What is a Bitcoin?

Created in 2009, Bitcoin offers the promise of lower transaction fees than traditional online payment mechanisms and is operated by a decentralized authority, unlike government-issued currencies. Today’s market cap for all Bitcoin (abbreviated BTC or, less frequently, XBT) in circulation exceeds $7 billion USD. There are no physical Bitcoins, only balances kept on a public ledger in the cloud, which – along with all Bitcoin transactions – is verified by a massive amount of computing power. As this was the first Cryptocurrency to exist, all digital currencies created since then are called Alternative coins or more commonly Altcoins. Litecoin, Ethereum, Ripple, Zcash, and Monero are just a few of the many hundreds of Alternative coins that exist alongside the most commonly known, which is of course Bitcoin.

Bitcoins can be ‘minted’ by anyone in the general public who has a strong computer. Bitcoins are made through a very interesting self-limiting system called Cryptocurrency mining and the people who mine these coins are called miners. It is self-limiting because a total of only 21 million Bitcoins will ever be allowed to exist, with approximately 16 million of those Bitcoins already mined and in current circulation.

How can our investment advisory
approach help you?

For a free assessment of your current financial condition…