Cryptocurrency Guides
The idea behind cryptocurrency is to use cryptography along side an algorithm to control the creation and transfer of value, rather than relying on central authorities. This means that you can send money to anyone in the world (on the network) without any middlemen. On top of that, cryptocurrencies is programmable money which means that you can create all forms of new and interesting applications or solution working with or on top of the currency. To many people the idea behind Bitcoin and other cryptocurrencies can be hard to grasp and might seem frightening at first. That’s the reason why we created this in-depth cryptocurrency guide that teaches you everything from the pure basics all the way down to the more advanced stuff. In the beginner section you learn how to buy cryptocurrency, send and receive it, and how to store it safety. While in the advanced sections you learn how to mine cryptocurrencies and even how to create your own altcoin.
Beginner Cryptocurrency Guides
Introduction to Cryptocurrency?
A cryptocurrency is a digital form of currency that is being used increasingly all over the world. If compared with the current traditional fiat currencies system a cryptocurrency is far more efficient in terms of usage and transaction costs. The first cryptocurrency to begin trading was Bitcoin back in 2009. Sinces then we have seen numerous cryptocurrencies being created with new algorithms with longer or shorter block times and overall behavior changes to better suit a future economy.
What is Cryptocurrency?
Among other things cryptocurrency is digital form of currency that is being used increasingly all over the world. If compared with the current traditional fiat currencies system a cryptocurrency is far more efficient in terms of usage and transaction costs. The first cryptocurrency to begin trading was Bitcoin back in 2009. Sinces then we have seen numerous cryptocurrencies being created with new algorithms with longer or shorter block times and overall behavior changes to better suit a future economy.
People often think of cryptocurrency only as virtual money or a transaction system. But if you look closer you’ll see that the monetary aspect is just the tip of the iceberg. That’s because cryptocurrencies and the blockchain is a groundbreaking internet technology for which money is merely one of the possible applications.
What is Money and Why Does it Exist?
Money exists to facilitate trade. Through the centuries trade has become incredibly complex everyone trades with everyone worldwide. Trade is recorded in bookkeeping, this information is often isolated in closed to the public. This is the reason why we use third parties and middlemen we trust to facilitate and approve our transactions. Think governments, banks, accountants, notaries and the paper money in your wallet. We call these trusted third parties.
Understanding the Essence of Cryptocurrency & Blockchain Technology
This brings us to the essence of cryptocurrency. Cryptocurrency software enables a network of computers to maintain a collective bookkeeping via the internet. This bookkeeping is neither closed nor in control of one party or a central authority. Rather, it is public, and available in one digital ledger which is fully distributed across the network. We call this the blockchain. In the blockchain all the transactions are logged, including information on the time, date, participants and amount of every single transaction. Each node in the network owns a full copy of the blockchain. On the basis of complicated state-of-the-art mathematical principles the transactions are verified by the cryptocurrency miners, whom maintain the ledger. The mathematical principles also ensure that these nodes automatically and continuously agree about the current state of the ledger and every transaction in it. If anyone attempts to corrupt transaction the nodes will not arrive at a consensus and hence will refuse to incorporate the transaction in the blockchain. So every transaction is public and thousands of nodes unanimously agreed that a transaction has occurred on date X at time Y. It’s almost like there’s a notary present at every transaction. This way everyone have access to a shared single source of truth.
It’s Not Just Smarter Programmable Money
The ledger does not care wetter a cryptocurrency represents a certain amount of Euros or Dollars, or anything else of value, or property for that matter. Users can decide for themselves what a unit of cryptocurrency represents. A cryptocurrency like Bitcoin is divisible in to 100 million units and each unit is both individually identifiable and programmable. This means that users can assign properties to each unit, users can program a unit to represent a Euro cent, or a share in a company, a kilowatt our energy or digital certificate of ownership.
Because of if this cryptocurrencies and blockchain technology could be used for more than simply money and payments. A cryptocurrency can represent many kinds of property. A thousand barrels of oil, award credits or a vote during an election for example.
moreover cryptocurrency protocols allows us to make our currency smarter and to automize our cash and money flows. Imagine a health care allowance in dollars or Euros that can only be used to pay for health care at certified parties. I in this case, whether someone actually follows the rules is no longer verified in the bureaucratic process afterwards. You simply program these rules into the money, compliance up front. The unit can even be programmed in such a way that it will automatically be returned to the provider if the receiver doesn’t use it after a certain amount of time. This way the provider can ensure that allowances are not horded.
A company can control its spending in the same way. By programming budgets for salaries machinery, materials and maintenance so that the respective money is specified and cannot be spent on other things. automating such matters leads to considerable decrease in bureaucracy.
What is a Satoshi?
A satoshi is the smallest fraction of a Bitcoin, to be exact a hundred millionth of a Bitcoin.
1 Satoshi = 0.00000001 ฿
10 Satoshi = 0.00000010 ฿
100 Satoshi = 0.00000100 ฿ = 1 Bit / μBTC (you-bit)
1,000 Satoshi = 0.00001000 ฿
10,000 Satoshi = 0.00010000 ฿
100,000 Satoshi = 0.00100000 ฿ = 1 mBTC (em-bit)
1,000,000 Satoshi = 0.01000000 ฿ = 1 cBTC (bitcent)
10,000,000 Satoshi = 0.10000000 ฿
100,000,000 Satoshi = 1.00000000 ฿
What is Ethereum?
Ethereum is a decentralized platform that runs smart contracts: applications (dapps, decentralized applications) that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.
Ethereum was created with the philosophy of how the Internet was supposed to work.
Ethereum was crowdfunded during August 2014 by fans all around the world. It is developed by ETHDEV with contributions from great minds across the globe.
Yet it’s similarities with Bitcoin and other cryptocurrencies, Ethereum is not only a currency, it’s platform for smart contracts and decentralized applications.
As the Wikipedia page says:
Ethereum is a blockchain-based virtual machine and Web 3.0 platform featuring stateful user-created digital contracts and a Turing-complete contract programming language. Ethereum uses its underlying network unit, Ether, as payment to execute Ethereum contracts as a workaround to the halting problem.
Ethereum Release Stages
Frontier: The first stage will be usable through a computer’s command-line only. It will allow mining at 10 % the normal rate, and contracts will be uploadable and executable. This is basically the time that people can begin to experiment with uploading their own DApps (decentralized applications) onto the network. Periodic “checkpoints” will also be performed by the Ethereum team to check network accuracy, causing a 12 hour latency period each day.
Homestead: When Homestead is launched mining will be bumped up to 100 % the normal rate. Checkpoints may or may not be removed. Operation will still be in the command-line only.
Metropolis: The third stage is when the user interfaces come out (possibly the Mist Interface), including a Dapp store, and non-technical users should feel comfortable joining at this point.
Serenity: The fourth stage, where things are going to get fancy: the network is going to change its mining process from Proof-of-Work to Proof-of-Stake.
Using Cryptocurrency?
It’s a good question! We believe that Cryptocurrencies is a step in the right direction for global trade where everyone can be involved, non excluded. To neglect the idea of currency protected by cryptography on a decentralized network today is like neglecting the idea of Internet and the Hypertext Transfer Protocol (http) back in the early nineties. People who understands this technology or people who can get a clear picture how it works can easily see the benefits as a whole for mankind.
Why use Cryptocurrency?
Why should we use Cryptocurrency? – It’s a good question and the answer is simple. We should use cryptocurrencies since it is a step in the right direction for global trade where everyone can be involved. To neglect the idea of Cryptocurrencies on a decentralized network today is like neglecting the idea of Internet and the Hypertext Transfer Protocol (http) back in the early nineties. People who understands this technology or people who can get a clear picture how it works can easily see the benefits for mankind. It’s the peoples money.
Benefits of using Cryptocurrency
- Send Money to anyone anywhere in the world, almost instantly, with no middle hand or excessive fees.
- Include everyone in the financial system, not only the people who have access to modern day banking.
- The possibility to build on top and around the block chain to fundamentally change the way we use and interact with money.
- The enormous amount of computing power that is generated to mine a cryptocurrency can be used to create a decentralized network for applications on top of the block chain. Ethereum is such a cryptocurrency, their target is aimed more at the framework for applications itself than the actual currency/money aspect.
How does the future of cryptocurrencies look like?
Bitcoin was the first prominent cryptocurrency to gain the public’s attention, but it is doubtful that it will be the last. In the wake of Bitcoin’s popularity, many coin developers have sought to improve upon the basics of Bitcoin and offer a more fulfilling and feature rich experience to newcomers. Quark offers security and speed, Darkcoin offers anonymity, for some a priceless commodity, Ghostcoin presents a lightweight platform that will not take up your computer’s processing power, and Huntercoin offers a cryptocurrency experience that is built around a game. Could one or more of these promising cryptocurrencies become the “Next Bitcoin?”.
Overall, the future appeal of cryptocurrencies lies in allowing users ultimate control over their money, with fast secure global transactions, and lower transaction fees when compared to all existing currencies. When used properly and fully understood the virtual currency ultimately serves its purpose. As a first generation currency it will be the initiator of many novel emerging systems that will fundamentally change our understanding regarding the concept of what is money, with the potential to perform a kind of ‘social good’ to developing nations poor populations unable to access traditional banking institutions.
Where do Cryptocurrency come from, how are they created?
With paper money, a government decides when to print and distribute money. Cryptocurrencies doesn’t have a central government. With Cryptocurrency, miners use special software and computing power to solve mathematical problems and are issued a certain number of coins in exchange. This provides a smart way to issue the currency and also creates an incentive for more people to mine and contribute to the network. In some cases the (with proof-of-stake coins) the network is upheld and coins created with minting. Minting is a process where the user stake his coins (coins can not be used in this stage) and in return gets a percentage of coins for helping to contribute to the network.
Buying Cryptocurrency?
Cryptocurrencies can be traded like any form or goods between people locally or online with the help of services like LocalBitcoins. But most commonly they are traded at an cryptocurrency exchange. Here are Wise Cryptos you can find detailed information and reviews about cryptocurrency exchanges in our cryptocurrency exchange directory.
How Can I Buy Cryptocurrency?
Where can I buy crypto: Cryptocurrency is digital form of currency that is being used increasingly all over the world. Cryptourrencies can be bought and traded from cryptocurrency exchanges or traded locally between friends, family and strangers with the help of third party apps that helps you locate buyers and sellers in your area or globally.
Buy Cryptocurrency from an Exchange
Buying coins from a cryptocurrency exchange is probably the most common thing to do. A cryptocurrency exchange does not own the currency itself. Instead, it acts as a market where currency buyers connect with currency sellers. Most exchanges let’s you trade fiat currency for cryptocurrency and the other way around. Other just do crypto to crypto exchanges.
It’s important to do your research before choosing your Exchange.
What coins do you want to trade?
If you are interested on getting your hands on some Bitcoins, then most exchanges should be able to help you out. On the other hand if you are looking for a newly released coin you have to understand that only a few cryptocurrency exchanges might trade with that currency. It’s also important to understand that Bitcoin trades against most fiat currencies, Other Cryptocurrencies for the most part only trades against Bitcoin (in some cases Litecoin). So remember to keep your eyes open for what trading pairs your choice of exchange trades with.
What is the exchange trade, deposit, withdrawal and bank transfer fees?
When most people choose an exchange they usually only look at the trade fees. This fee can vary between exchanges from as little as 0.2% to as high as 3%. What most people usually forgets though is that most exchanges has deposit and withdraw fees, these fees can far exceed the total cost of trade fees depending on your trading patterns. On top of that the banks want their cut for transferring your hard earned fiat currency, this cost is usually the largest in comparison with the others fees. Though this cost is out of the control of the exchange is still important to choose and exchange that cooperate with your bank, or banks in your country without adding large excess fees.
Is this exchange legit?
While most cryptocurrency exchanges stay true to there word, we have seen some close down for good with out paying out the currency owned to it’s users. It’s important that you do your research here and ask around in the community before just transferring fiat or crypto to an unknown vendor. It can also be smart to check out the exchange security records, have the exchange be hacked so far, if so, how did they handle it? We recommend using our Cryptocurrency Exchange Directory to find information, reviews and ratings from real people.
Buy Through a Cryptocurrency Wallet
Some wallet providers, including Blockchain.info, Circle and Xapo, allow you to buy the coins directly from your wallet, using a fixed rate. To do this, you will also have to tie your bank account and identity to your cryptocurrency wallet.
Pros and Cons of purchasing cryptocurrency through a wallet
It’s ridiculously fast
When purchasing cryptocurrency directly from a wallet provider the transaction will be instant. Keep in mind that only a few cryptocurrency wallets available today allows you to trade instantly with fiat currency markets.
Your privacy is at risk
The downside of purchasing cryptocurrency through a wallet is that your wallet address will be tied to your bank account, and your bank account is tied to your identity. This fundamentally breaks the pseudonymous principles and features found in many cryptocurrencies existing today.
Buy Cryptocurrency Through ATMs and Kiosks.
The network of bitcoin and cryptocurrency ATMs rapidly spreading across the globe. ATMs accept cash, for the most part of it’s local fiat currency. You can find your ATM by using our Bitcoin & Cryptocurrency ATM Map. With the help of the map and directory you can easily find the closest ATM. The ATM listings also provide opening ours, currencies traded, and other ATM specific information. In addition to ATMs, businesses and the community is working hard to bring bitcoin and cryptocurrency purchase available at kiosks, post offices and tobacco shops.
Buy Cryptocurrency Peer-to-Peer (Person to Person)
To buy cryptocurrency from an individual, you will first need to find a seller. There are many ways to locate a bitcoin or cryptocurrency seller in your area. Mycelium Local Trader is one of them, it’s a decentralized in-person exchange that is built right into the Mycelium Bitcoin Wallet. LocalBitcoins is another site that vastly improves the experience of buy bitcoins locally. Ofcourse you do not have to be close to the person you would like to trade cryptocurrency with either. You can always trade peer-to-peer globally using these tools and base your judgment on the review and score system embedded into the sites and applications to verify a trustworthy counterpart.
Thing to be aware of when trading cryptocurrency peer-to-peer.
Transact in public places
If a transaction is done face to face it is recommended to meet the person in a crowded area like a cafe or similar. Though thousands of face to face transactions are made safely every day, there has been an incidents where bitcoins has been stolen under gunpoint during a transaction.
Be aware of Phishing Sites
It’s important that you verify that the site and/or app you conduct your peer-to-peer over. Some cases of phishing attacks has been made on major peer-to-peer trading sites and applications. A phishing attack is an attempt to acquire sensitive information such as usernames, passwords, and personal details by masquerading as a trustworthy peer-to-peer entity in an electronic communication like email or chat.
Buy Cryptocurrency With Credit Card
In the past it has been seen as risky business for sellers to offer the option of buying Bitcoin and other Cryptocurrency instantly with credit cards. Recently that has changed and some services are now allowing you to buy cryptocurrency with your credit card. However, that does not mean it is entirely risk free in all markets; if you are from Asia or Africa your funds may be frozen by credit card payment processors for further inspection due to the large amounts of fraud that come from those continents.
Buy Cryptocurrency With Bank Transfer
This sulution is offered by most cryptocurrency exchanges today.
Buy Cryptocurrency With PayPal
TBA
Buy Cryptocurrency With Cash
To find out more about how it works and how you can use it with the help of our Cryptocurrency Guides.
You can buy cryptocurrencies from various exchanges around the world. Please refer to our Cryptocurrency Exchange Directory until this article is completed.
Cryptocurrency Mining Guide
What is Cryptocurrency Mining?
Cryptocurrency mining is a process that secures the network, and at the same time rewards the miners with cryptocurrency. To mine cryptocurrency you need mining hardware. The three main categories of mining harder is GPU’s FPGA’s and ASIC’s In the beginning the cryptocurrency miners mainly relied on CPU/GPU as mining hardware. As the hash-rate and competition grew so did the need for better and more competitive hardware. A new for of hardware saw the lite of day, ASIC’s.
Crypto Mining Pools
A Mining pools main objective is to source it’s miners computing power in to one big pool. When doing so the miners chance to actually win a block reward increases dramatically. When the block reward is won it needs to be divided fairly among the miners, based on each miner’s computing power contribution. Cryptocurrency Mining Pools uses a variety of different mining pool reward types to the achieve this. Learn more about mining pool reward types and how they differentiates form each other.
A Mining pools main objective is to source it’s miners computing power in to one big pool. When doing so the miners chance to actually win a block reward increases dramatically. When the block reward is won it needs to be divided fairly among the miners, based on each miner’s computing power contribution. Cryptocurrency Mining Pools uses a variety of different mining pool reward types to the achieve this. Below you will find information about all mining pool reward types and how they differentiates form each other.
Mining Pool Reward Types
CPPSRB – Capped Pay Per Share with Recent Backpay.
DGM – Double Geometric Method. A hybrid between PPLNS and Geometric reward types that enables to operator to absorb some of the variance risk. Operator receives portion of payout on short rounds and returns it on longer rounds to normalize payments.
ESMPPS – Equalized Shared Maximum Pay Per Share. Like SMPPS, but equalizes payments fairly among all those who are owed.
POT – Pay On Target. A high variance PPS variant that pays on the difficulty of work returned to pool rather than the difficulty of work served by pool.
PPLNS – Pay Per Last N Shares. Similar to proportional, but instead of looking at the number of shares in the round, instead looks at the last N shares, regardless of round boundaries.
PPLNSG – Pay Per Last N Groups (or shifts). Similar to PPLNS, but shares are grouped into “shifts” which are paid as a whole.
PPS – Pay Per Share. Each submitted share is worth certain amount of BC. Since finding a block requires shares on average, a PPS method with 0% fee would be 25 BTC divided by . It is risky for pool operators, hence the fee is highest.
PROP – Proportional. When block is found, the reward is distributed among all workers proportionally to how much shares each of them has found.
RSMPPS – Recent Shared Maximum Pay Per Share. Like SMPPS, but system aims to prioritize the most recent miners first.
SCORE – Score based system: a proportional reward, but weighed by time submitted. Each submitted share is worth more in the function of time t since start of current round. For each share score is updated by: score += exp(t/C). This makes later shares worth much more than earlier shares, thus the miner’s score quickly diminishes when they stop mining on the pool. Rewards are calculated proportionally to scores (and not to shares). (at slush’s pool C=300 seconds, and every hour scores are normalized)
SMPPS – Shared Maximum Pay Per Share. Like Pay Per Share, but never pays more than the pool earns.