The Race to Crack the Crypto Code
The Race to Crack the Crypto Code
With new technology constantly popping up around every corner, it can be hard to keep up.
It can seem even more menacing when that technology influences the way we view currency — the powerhouse of our society.
But my mission is to keep you informed on all things financial… and sometimes that includes understanding the technicalities of certain types of assets.
Recently, we covered the basics of cryptocurrencies (click here to view). Specifically, we went over what they were and a little bit about how they worked.
Now it’s time to delve a little deeper past the crust and into the meat of it all. And you’ll want to keep learning because the higher your financial literacy, the better chance you have at boosting your financial situation.
That’s why I’ve done some research for you.
Let’s get right into it…
What Is Cryptocurrency Mining?
There are two major tasks that cryptocurrency mining performs: adding new transactions to the ledger (or the blockchain) and putting out new currency. Each block that miners add must contain proof-of-work, or PoW. (Not to be confused with WoW.)
To mine you need a computer and special software in order to assist miners in a battle of mathematical wits with their mining peers. Using this software, miners work to solve a block with the transaction data and the use of cryptographic hash functions.
Hash value is a number of a specific length that uniquely identifies data. Miners use their software to focus in on a hash value less than the target and the miner who cracks it first is considered the one who “mined the block.”
The winners are eligible for the reward of 12.5 bitcoins per block mined.
Back in the days of yore it was only cryptography enthusiasts who acted as miners. But since cryptocurrencies became popular and of higher value, mining is now thought of as a fruitful business venture.
With enterprises taking on the task of mining, the lone-wolf miners started to join the pack in order to compete effectively and receive those rewards.
Even if you don’t want to join the ranks of crypto miners, you can still profit off of cryptocurrency!
How, you ask? Well, buckle up because I’m about to take you further down the crypto rabbit hole…
How Do I Get My Very Own Cryptos? (And Trade Them, Too?!?)
As with any other type of currency, you can get them by exchanging goods and services. You can also trade actual dollars for them or even trade one type of cryptocurrency for another.
You’ll need a cryptocurrency wallet in order to hold onto your cryptos since this process typically takes place entirely online.
Cryptos are usually traded via brokers and exchanges. The broker is a third party that buys and sells the currency directly between peers. You don’t necessarily have to use a broker to trade cryptos, though.
Two popular platforms that can be used for the purpose of trading cryptos are Kraken and Coinbase.
You will also need a method for selling your cryptocurrencies.
In order to cash out you’ll most likely need to convert your cryptocurrency back into a popular coin like bitcoin or ethereum. At this point you will go through platforms (such as the ones mentioned above) and trade your cryptocurrencies for dollars.
It’s important to note that cryptocurrency values can be volatile. Anytime you get into trading you should be ready for some level of risk. And be ready to report any earnings to your tax preparer.
This is not professional investment advice. Use this as the basis for your own research.
Always do your homework before trading anything!