What is a Cryptocurrency?


A cryptocurrency is a digital medium of exchange that uses encrypted software to operate a market for transactions. That market is overseen by those using the network, based on rules coded into algorithms. It’s a transparent, peer-to-peer operation, similar to the file-sharing protocol BitTorrent which is widely used for the illegal sharing of movies, TV shows and music.


How are cryptocurrencies propagated?


Crytocurrencies are created, or mined, based on a mathematical formula. In the mining process, computers are tasked to solve complex mathematical problems and rewarded with virtual coinage. Over time, the equations become progressively more difficult to solve, slowing down the supply of new cryptocurrency units.


Can anyone become a miner?


Theoretically it is possible to start mining at home. But as the mathematical challenge becomes harder, more computational grunt is required. For this reason, miners often pool resources to buy access to supercomputers or server farms (networked arrays of smaller computers).


How many cryptocurrencies are there?


The market for such payment instruments is dominated by Bitcoin, but there are scores of other currencies including Blackcoin, Litecoin, Dogecoin, Megacoin, Onecoin, Namecoin  etc and there is even a sexcoin.


What are they worth?


Values fluctuate based on supply and demand (and market sentiment). At the time of writing, one Bitcoin is worth $US651. But the price has gone as high as $US1145.  On the other hand, one Litecoin is worth just over $US4.30.


How do you buy and sell it?


A transaction is similar to a direct transfer between bank accounts. Algorithmic verification ensures that the same unit of currency can’t be owned by more than one person at the same time. In most cryptocurrencies, accounts known as wallets are stored either on hard drives or remotely in the cloud. Every transaction is recorded in a ledger called the blockchain that is accessible by every currency owner.


What can you buy with it?


Because of its widespread adoption, Bitcoin is the most liquid of the alternative currencies and can be readily exchanged into US dollars. In addition to being used to pay for goods and services on a person-to-person level, a number of larger enterprises have begun accepting Bitcoin as payment.


What are the benefits of Cryptocurrencies?


A Cryptocurrency is a digital or virtual currency that uses cryptography for security. It is a medium of exchange like normal currencies such as USD, but designed for the purpose of exchanging digital information through a process made possible by certain principles of cryptography.


Cryptography is used to secure the transactions and to control the creation of new coins. A cryptocurrency is difficult to counterfeit because of this security feature.


A defining feature of a cryptocurrency is that it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation. Encryption techniques are used to regulate the generation of units of currency and to verify the transfer of funds, operating independently of a central bank.


Moreover decentralized cryptocurrencies such as bitcoin provide an outlet for personal wealth that is presently beyond restriction and confiscation. Interestingly an Offshore Corporate Structure be can used to hold cryptocurrency so that any capital gain occurrs or is realized in a nil tax environment. Check our Blog Article of 18 July for details of how that can work.



14 August 2016


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