Bitcoin is one of the hottest buzzwords right now. No matter where you look online somebody is talking about it. And being at record high-level prices, that makes a lot of sense! Although still a highly volatile market, cryptocurrencies are rapidly gaining in popularity.
The top three cryptocurrencies have an estimated value of over $300 billion USD. This short guide is going to help you understand bitcoin, bitcoin forks and what to look for if you are interested in investing in the currency.
Cryptocurrencies and Bitcoin
To some people, cryptocurrencies may sound a bit like a scam. It’s digital money that has no real world origin or backing. Unlike other currencies which are backed by countries or gold, cryptocurrencies are endorsed by communities. Essentially, if enough people think it will work then the currency will work (not unlike real currency.)
You can think of a cryptocurrency exchange much as you would a ledger except that all information is public. The amount of Bitcoin each user holds is public information and this information is updated in real time across computers all around the world.
This makes Bitcoin secure against hacking as it would be nearly impossible to hack all of the different computers on the exchange. This also adds to the legitimacy of transactions as no one can pretend they have more of the currency than they really have.
Although not exactly the first, Bitcoin has been the form of cryptocurrency that ushered in this revolution. Nowadays, it is used synonymously with the term cryptocurrency in general much in the same way people use Kleenex instead of tissue. This article will focus on Bitcoin, but it does have some rivals including Ethereum and Ripple.
Understanding mining is critical to cryptocurrency. Mining is a way for users to earn currency without having bought any of it. Cryptocurrency is all about exchanges and through using your computer to “mine” which is the process which verifies transactions and adds them to the public ledger which is called the blockchain. Any person with an Internet connection and the suitable hardware can do it.
However, it is important to note that any computer with a solid graphics card could mine fairly well, but nowadays there are computers that are specifically designed to mine so it can be hard for the average user to really get a lot out of mining when competing against that.
Bitcoin Forks are quite new. The first one occurred on August 1, 2017 and imitators have followed suit since then. This was unusual because there are many imitators of Bitcoin, but this worked differently. This network dubbed Bitcoin Cash instead branched off the existing Bitcoin database.
You can think of it similar to a stock split. So anybody who owned one Bitcoin now owned a Bitcoin Cash. Now Bitcoin Cash’s currency in circulation is valued roughly $20 billion. Also, it has the effect of pushing up the value of the overall currency which is now currently over $170 billion.
As a result, this has spawned numerous imitators who want to similarly cash in on the value of their Bitcoin. Since August there have been numerous new exchanges created including Bitcoin Diamond, Bitcoin Gold, Bitcoin Uranium and so on.
Advantages of These Forks
With the current value of original Bitcoin being so high, the average person cannot buy a significant amount of it easily. Purchasing even ten Bitcoin would cost well over $100,000. These forks give users at an opportunity to buy at much more affordable level. For example, today one Bitcoin Gold cost $170 and other networks may be even cheaper.
The original Bitcoin also faced technical limitations. BTC blocks are limited to one megabyte in size. This translates into three transactions each second. New currencies like Bitcoin Diamond, raised their block limit size which both improves transaction capacity and block generation speed.
As a result, the cost of transactions is reduced making it cheaper per transaction. They also offer other features. Bitcoin Diamond actually encrypts user balance and other information affording the privacy some people may want.
Disadvantages of Bitcoin Forks
Anybody interested in investing in this market must know that it is highly volatile. Even BTC which is now the cornerstone of all these forks, rapidly changes in its valuation. Many of the currencies will fail, but some will succeed and knowing which of these is the right one for you to invest in can be tricky.
Deciphering which of these to go for can be a challenge and for the average person way too much research would be involved. Some of the splits come from individuals and groups effectively trying to improve Bitcoin transaction and exchanges, others are just an attempt to cash in on the craze while others may simply just be a joke such as Bitcoin Uranium which has the ticker symbol BUM.