Cryptocurrency FAQ

Cryptocurrencies can be very confusing to a new user. Here is a list of the most common questions and answers about cryptocurrencies, the future of money.

What Is A Cryptocurrency?

A cryptocurrency is a new form of currency that is entirely digital – meaning that it exists solely on its own network. Cryptocurrencies operate solely peer-to-peer, meaning that they are completely global and are not controlled by any sort of government. In a sense, they are like virtual money that can be spent on items or services, or even exchanged for real cash.

How Many Cryptocurrencies Currently Exist?

Because anyone can create their own cryptocurrency, there are over 100 different cryptocurrencies currently in existence. However, there are only a few that are widely accepted.

What Cryptocurrencies Are The Most Popular?

Currently, the most popular cryptocurrency in existence is Bitcoin, followed by Litecoin and Dogecoin. Bitcoin was the first cryptocurrency created, and has the largest total value (market cap) of over 10 billion USD.

Who Created Bitcoin?

While the original founders and creators of Bitcoin are relatively unknown, it is believed that one of the original founders is a man named Satoshi Nakamoto. Satoshi Nakamoto stopped working on Bitcoin in 2010, and since then, many people have gone on to further develop Bitcoin.

What Are Cryptocurrencies Used For?

Cryptocurrencies are used for the same exact things regular money is used for – making transactions to purchase digital or physical goods and services. While Bitcoin was originally used for making anonymous transactions on illegal marketplaces, Bitcoin (and many other cryptocurrencies) have gone on to be accepted on many legitimate websites and may even be used to purchase physical goods in retail stores.

What Are The Advantages of Cryptocurrencies?

Cryptocurrencies have numerous advantages which can make them more desirable to use under certain situations, including:

  • Complete anonymity – transactions made with cryptocurrencies can be made completely anonymously.
  • Complete Control – you have complete control over the transactions you make. This means that no company can sneak additional fees on you, there is no way to automatically withdraw from your cryptocurrency wallet.
  • Complete Freedom – You can quickly and easily send cryptocurrencies around the world – no waiting for deliveries or holidays.
  • Safety For Vendors – Transactions made through cryptocurrencies are secure and irreversible. This prevents chargeback scams that sites such as Paypal are notorious for. Transactions also do not contain the customers personal information, making identity fraud a non-issue.

How Are Cryptocurrencies Acquired?

Cryptocurrencies are generated through a process called mining, which is done through a miner’s computer. Essentially, computers are given extremely challenging hashing algorithms to decrypt. When a hash is decrypted, coins are generated. As more coins are generated, the problems to solve get even more challenging, making the influx of coins slower and slower. The process of solving the problem is often referred to as ‘finding blocks’.

Alternatively, cryptocurrencies can be purchased through a cryptocurrency marketplace such as Cryptsy.

How Do I Mine Cryptocurrencies?

You can mine cryptocurrencies by downloading a cryptocurrency miner and setting it up to connect to a mining pool, which is essentially a group of computers that work together to find blocks. Your computer uses its hardware to contribute shares to the mining pool, and when a block is found, the payout is divided up based on how many shares you contributed. A full tutorial on mining will be available on this soon.

Can I Make Money With Cryptocurrencies?

Yes, it is very much profitable to make money with Cryptocurrencies, through both mining and investing. In fact, some of the early miners and investors of Bitcoin are now millionaires – however, investing in cryptocurrencies a very risky business because they fluctuate in value so much.

What Determines The Price of a Cryptocurrency?

The price of a cryptocurrencies is decided in a similar way to stocks, in the sense that they are completely driven by supply and demand. If a demand for a cryptocurrency is high, it will raise in price. Likewise, if the supply is higher than the demand, the price will drop.

What Is A Wallet?

A wallet is simply a program on your computer that can be used to store, send, and receive coins.

What Happens To Lost Cryptocoins?

If a wallet containing coins is destroyed, the coins are virtually gone. While they are still technically in existence, there is no way to ever regain those coins, and thus, they will never be in circulation. This means that cryptocoins will always become continuously scarce as more of them are lost.

Are Cryptocurrencies Secure?

Cryptocurrencies are incredibly secure – and most vulnerabilities are quickly fixed when they are found. Most lost coins are a result of user error – namely, accidentally deleting a wallet.

Can My Cryptocurrencies Get Stolen?

Yes, unfortunately. However, this can be easily avoided by encrypting your wallet. After encrypting your wallet, you are prompted to provide a password before transactions can be made, preventing hackers from stealing your coins unless they know your password.

I Have A Question Not Mentioned Here!

If you have any additional questions, feel free to send me an email at james[at]cryptoclassroom.com and I will assist you to the best of my ability.