Crypto currency explained
How to explained crypto currency in a way that even a 5 years old person can understand? What’s blockchain? what are coins and tokens? what about privacy? these are some of the things that will be discuss on this blog post.
What’s crypto currency?
Crypto-currency is a digital currency use as a medium of exchange for goods and services.
When money is in a centralize bank account, it’s digital with just ones and zeros. It’s numerical only, so It can be seen, but It cannot be touch and it cannot be smell.
When money is in a decentralize Blockchain, Crypto-currency money is the same thing. It digital only. It’s ones and zeros. It can be seen but it cannot be smell and it cannot be touch.
What’s Blockchain?
Banks are centralize, meaning it’s control by the government or by an authority. Banks are a group of computer that are privatize.
Banks store information in their centralized location.
It’s possible for someone working at the bank to cheat. Since the have access to data that the public do not have.
Blockchain is like a bank that is decentralize. Meaning it’s not control by the government or by an authority. Block-chain like the name implies, it’s a bunch of computers connected to the same network.
Blockchain do not store any information since there no centralize location. Blockchain just copy and spread the information across all the computers in the network.
It’s impossible for someone to cheat with blockchain. Every time there is a computation every person connect to the network get a copy reflecting the changed that was made.
Everybody is making transaction, think of buying and selling or selling and buying. Every time a transaction is made the computers connected to the blockchain network are use to compute and to spread information.
What about Privacy?
When people use a bank account, the bank has their name and their personal information.
When people use blockchain, they are anonymous, no one knows who they are. They just has wallets that allow them to stored the money and make transactions.
The Wallets has two set of numbers. A private number and a public number.
A private number for the account holder alone, the account holder never shared this number with anyone.
A public number, this number is the one that people use to do transactions in public. Every person can see this number, since it’s a public number.
What is Token and Coin in Crypto?
Coin
People call coin the numerical value that is use in blockchain. Example, Bitcoin is a crypto currency that use coin. People that trade Bitcoin use the blockchain network.
Token
If someone has car, that car has a title that identify that someone own that car.
In crypto, a token represent that someone own money or asset, it represent what a person owns.
Some people create a platform that use blockchain technology and money that they use is call token.
Ethereum use token.
Someone can’t convert a token into a coin. Someone can create a coin that function as a token, then people can swap out their token for coin.
One thing to know is that some coins can be represented as token in another network.
Example, some people can use coin in another crypto platform as a representation of Ethereum token, to mimic Ethereum to trade like stocks.
Why?
Because if Ethereum price is currently $2600 some people may not be able to trade like stock at that price. So what some people do is use other platform as a representation of Ethereum token to do micro transactions of maybe $100 instead.
The future
It appears that cryptocurrency is going to be the world currency, since people can trade with anyone any where in this planet without worrying about the middle man.
That’s it.
Take a calculated risk.
Now, start and adjust as you go.
