Introduction to Cryptocurrencies

Whether you work in an office, a medical corridor, on a construction site, or in a restaurant or retail environment, you've probably encountered rumors about the enigmatic new global currency framework that has emerged outside of the conventional USD. That's right- I'm talking about cryptocurrency. Perhaps it was your fanatical friend rattling on about ushering in the golden era of commerce with this new, revolutionizing economic system. Or it could have been a news program or tech article discussing the underlying blockchain technology, and the implications behind it. Or still yet, it may have been something as simple as you overhearing two of your coworkers discussing the exponential rise in the price of Bitcoin, or a Facebook Trending update in the right-hand corner of your Facebook page that gave it mention. Whatever the case may be for how you were exposed, cryptocurrency is here to stay, and so it is in your best interest to become at least a little acquainted with it.

When people first hear the term 'cryptocurrency', there is either no association in their mind, or there is one very clear one: Bitcoin- the poster child for the cryptocurrency realm. Bitcoin is, and has been, the leader in cryptocurrencies both in market capitalization and name recognition. However, while it is the most well-known, it is by no means the only major cryptocurrency with a unique, useful, and secure capacity for being a medium of exchange, as demonstrated this year with the increasing momentum of other cryptocurrencies such as Ethereum, with the the #2 market capitalization position and currently trading at $800+/ETH at the time of this article. Despite the misconception that cryptocurrencies are a niche interest of the technology enthusiasts, the gullible, and the underworld with only a few dollars being thrown around in the entire crypto-economy, the recent introduction of institutional investors, governments, and "dumb money" have indicated otherwise. Now is the crucial time to get your grip around this technology, investment, and culture before it goes mainstream and you get left behind.

Ok, so I might be interested- I'm not saying I am, but if I were- what is cryptocurrency?

As Wikipedia indicates- cryptocurrency is a digital asset designed to work as a medium of exchange, using cryptography to secure transactions, control creation of additional units, and to verify the transfer of assets. These are all very important to commerce and economic sustainability, and have been fine-tuned since the introduction of viable cryptocurrency back in 2009 in order to arrive to where we are today to the point where you can transact using cryptocurrencies between individuals and select merchants.

Nice. I've heard a bit about Bitcoin and that it's over a couple thousand dollars. How can I find out how much each cryptocurrency is worth?

Yeah, Bitcoin actually reached a high of $19000+ just a couple of days ago, sitting now at ~$17000/BTC at the time of this article. While each of the various exchanges will give you a quote of the fair trading price in real-time, for simply seeing what the price, ranking, and market capitalization for each cryptocurrency is at any given minute, check out coinmarketcap.com, the go-to resource for regular traders and "hodlers" (what cryptocurrency holders are referred to), to get a price quote and to get a sense of where cryptocurrencies are positioned relative to one another.

Neato- now I know what each of them are worth, but I don't actually know that much about them. How do they work?

Well each cryptocurrency may differ from another in purpose, mining methods, voting methods, cryptocurrency distribution, type of transaction validation algorithm, quality of transaction security, transaction anonymity, limit (or lack thereof) of amount of cryptocurrency to be distributed, among other things. As an example, I'll show how Bitcoin pairs up with each of these different criteria:

Purpose: store of value and medium of exchange with secure, immutable transactions.

Mining Methods: while one could theoretically mine Bitcoin using CPUs, GPUS, or FPGAs, the amount of miners in the space has rendered obsolete these past methods in favor of using the ASIC mining chip that is specific for Bitcoin mining.

Voting Methods: Proof-of-Work (PoW). The collective miners of Bitcoin are able to vote with hashing (mining) power, via their nodes, on upgrades to the Bitcoin blockchain, otherwise known as BIP proposals.

Cryptocurrency Distribution: miners use hardware for computer processing in which their machine resolves a complex cryptographic puzzle in order to acquire a Bitcoin. Miners also get some amount of Bitcoin via transaction fees every time a block of transactions is admitted to the blockchain.

Type of Transaction Validation Algorithm: blockchain, as opposed to DAG.

Quality of Transaction Security: secure. The real concern lies with bad actors producing a majority of hashing power and working in concert to inflict a 51% attack

Transaction Anonymity: pseudo-anonymous

Currency Cap: 21 million, which will be met in the year 2140.

To learn about the mechanics of how each cryptocurrency functions, check out its whitepaper, and follow the blogs and version histories of its developers. For starters, I'd recommend first learning about Bitcoin, then Ethereum and Litecoin, then branch out to others based on the top 10 cryptocurrencies on coinmarketcap, then go based off of the concepts of each altcoin that you believe could have a future.

Okay, that's a bit heavy for me at the moment. Where can I find some surface level information on each of these cryptocurrencies?

Google is your friend. Check out CoinDesk, CryptoCoinNews, and CoinTelegraph for regular news updates on the most prominent cryptos. Forums such as the cryptocurrency threads on Reddit, like r/Bitcoin, as well as BitcoinTalk will give you a good idea of practical crypto news and trading tips. Additionally, some books I have personally read that can give you a good understanding of the history and culture behind cryptocurrency are The Age of Cryptocurrency and Digital Gold. For a more technical analysis of the underlying blockchain and cryptography, I'd definitely recommend Bitcoin and Cryptocurrency Technologies.

I'm not ready to invest right now, but when I am- what should I use and how does it work?

Of course, you should explore the various wallets and exchanges for yourself, taking into account how much in transaction fees + if there is a premium to buy crypto from the exchange, how safe it is to use the wallet/exchange, how many people recommend it, and whether it has an only-wallet function, only-exchange function, or wallet-exchange function. To clarify: a wallet is where you store your cryptocurrency, and an exchange is where you buy/sell your cryptocurrency. In my experience-- and the r/Bitcoin group and various google searches will confirm this-- the best wallet-exchange for starters is Coinbase.

Coinbase is highly-lauded due to its long-standing reputation, security relative to other wallet-exchanges, assurance of transaction completion, simple interface, and the ability to serve as a wallet and an exchange. From the Coinbase app or website, you can purchase either Bitcoin, Ethereum, or Litecoin easily, and then store it on your account worry-free. Should you choose to send your cryptocurrency to another exchange or move it to a hardware wallet (which many crypto-enthusiasts will recommend that you do for large amounts of cryptocurrency), you will find that it is an easy process on Coinbase.

To get started, go on coinbase.com and make an account. Write down your password on at least two pieces of paper, as this is a very good habit for cryptocurrency transactions later on given that sending crypto to the wrong address means that you will be unable to recover your sent funds, and I would also use a password manager, like LastPass, in addition to the pieces of paper. Go through the steps to create an account until you finally get to the point where you need to link up your Coinbase account with your bank account. This takes between 5-9 days, so you won't be able to trade cryptocurrency through Coinbase until that happens. Over that course of time, Coinbase will make 2 deposits of just a few cents into your bank account, which you will need to specify the amounts in order to finish linking up your bank account. Finally, after your bank account is linked up, just ensure that you have 2 Factor Authentication enabled, by going to 'settings' or 'accounts' on your Coinbase account, with either SMS-messaging through your mobile number or an authenticator token through an app like Google Authenticator. At this point, so long as you have your password in multiple copies, you're good to start trading.

Note: while the purchase of cryptocurrency on Coinbase is instant when first selecting 'Buy ____' and then confirming the purchase, Coinbase typically takes up to a week to deliver the crypto into your wallet, so don't panic if you don't see the crypto in your wallet immediately upon purchase.

Lastly, how safe is it?

I'm not going to sit here and lie to you that there isn't some level of risk in the crypto game- it comes with the territory. However, for all intents-and-purposes, Coinbase is pretty mainstream and has been for at least a little while. What is the most secure is the algorithm behind the Bitcoin blockchain which ensures that the transaction occurs. What's less safe are the exchange and wallet failures + hacks, social engineering, human error, and ponzi-schemes of certain altcoins. It would take a few more paragraphs to discuss all of this in detail, so I'd rather just end here and discuss all of this in a follow-up article on some later date.

With this, I'll leave: cryptocurrency is a new space, but a burgeoning one. Everyone and their mother is getting involved with it.

Do some research and get a sense of the culture before doing any buys- I waited about 2 months, although that might not be necessary in your case. Stay safe, and enjoy the best of what this new technology and investment has to offer!