Dear Crypto Diary,
All over the internet I’ve been reading the phrases “mining Bitcoin” and, “blockchain technology”. Originally I had no clue what those actually meant, and I’d already invested. That worried me quite a bit. So I decided, before I went any further, that I’d delve into their meanings. So here it is explained simply, by a girl who started a week ago.
Okay, the big difference between Bitcoin and a dollar is that Bitcoin isn’t backed by a central government that regulates how much of it is produced, it’s decentralized. Here’s why that matters: If you produce too much currency, you get deflation, which is super bad. If you don’t produce enough currency, you get inflation, which is also super bad. Basically, without some form of regulation determining how many Bitcoins are in circulation the cryptocurrency easily becomes volatile, changing drastically in price.
So how does mining come into all of this? Bitcoin ‘miners’ are the people who help determine how much Bitcoin is in circulation. They do this by verifying transactions and adding it to the public ledger. No, they aren’t super geniuses, (but some I’ve talked to seem to think they are) they just use computing power by way of mining rigs to figure it out. In return for helping out, they are paid in newly-created Bitcoin. But there aren’t enough bitcoins to pay every miner, they compete for them. It’s a full-fleshed internet battle royale to see who can complete computational puzzles the fastest.
The “blockchain” really is just a glorified public ledger. It keeps a record of who’s buying and selling, but it also assesses value. In essence, it’s what miners use. The real hook with “blockchain” is that it’s unhackable. How? Because it’s public and stored on millions of computers simultaneously. It isn’t controlled by one person or corporation. It’s nearly human proof.
Crypto-lingo isn’t as hard to understand as it seems. Trust me, if I can learn this, you can.
Yours in investing,
© New Kapitall Holdings LLC. All rights reserved. Kapitall Wire is a division of New Kapitall Holdings LLC. Kapitall Generation, LLC is a wholly owned subsidiary of New Kapitall Holdings LLC. Kapitall Wire, which is not a broker/dealer, offers free cutting edge content and commentary and is produced for informational purposes only and should not be construed as research. Kapitall Wire is a product offered by New Kapitall Holdings, however, KapGen compliance personnel will oversee all Kapitall Wire material prior to release.