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Bitcoin, Ethereum, blockchain - this is not the new periodic table or a language made up by computer geeks. Welcome to the world of cryptocurrency, a place that can be very intimidating when you're new. Our beginner's guide to crypto series is here to help you understand the key concepts of cryptocurrency in a way that doesn't leave your head spinning. We'll explain the terminology and how it works and introduce you to a space where you are your own master.
But first, as a luxury furniture and interiors brand, why are we tackling crypto at all? The answer lies in NFTs which we'll get into during the course of the series. Here's a great story that illustrates the link between the metaverse (virtual world) and interior design.
In 2021, 29-year old Argentinian digital artist, Andrea Reisinger, created a line of “virtual furniture” that made him a cool half a million real dollars on Nifty Gateway, an online auction site for blockchain-backed digital assets. Reisinger has plans to create actual versions of his virtual furniture, a move that could dramatically change how furniture is created and sold. Instead of a 4-year process to design, manufacture, test and market a luxury chair, designers will be able to skip all those steps and gauge demand for their product by posting a virtual piece online before sending it into production. Reisinger puts it like this: "I am a faithful believer that you should only physically create what is already in demand.”
More on this in our next article; for now, let's dive into the world of crypto and blockchain.
We're on a mission to help everybody understand the potential that cryptocurrency and blockchain technology have to change the world. It really is that big. So whether you're kind of finding your feet or you've never heard the term blockchain before today, this is the place to find answers.
1. What is cryptocurrency?
Cryptocurrency, often called “crypto,” is a decentralised digital currency that is based on cryptography. So it's basically just like a digital form of cash. You can use it like normal currency to make online purchases or you can transfer it to friends and family anywhere in the world. If you're thinking so far so PayPal, you're not wrong. But there's more to it. Let's break down the three most important terms above: decentralised, digital and cryptography.
Decentralised currency is the opposite of the centralised currency that we're familiar with eg. the pound, dollar or euro. When you buy online in these currencies, the online payment gateways are owned by organisations, usually a bank. They hold your money and they transfer it on your behalf when you buy something. Think about the process when you book a flight on your credit card. You're making the purchase, but your bank is the one handling your transaction and actually transferring your money to the airline. In cryptocurrency, there is no central organisation handling your transactions. Cryptocurrency is decentralised, meaning that it is created, exchanged and managed by anyone with the right software. You essentially act as your own bank and communicate directly with the seller or another third party. – no middleman requires. This direct communication between parties is called a peer-to-peer network.
Cryptocurrency is digital, creating two key aspects that make it different from centralised currencies. Firstly, crypto is traded only in digital format, meaning you can't hand over a few physical Bitcoins at the bar for a pint. And secondly, the value of most crypto* isn't determined by flat currency rates or the price of gold, so you don't have to worry about the market exchange rate when you're heading for your summer holiday in Spain.
The name cryptocurrency is a combination of cryptography and currency. Cryptography is the mathematical technique that is used to secure each unit of cryptocurrency and make sure no one else can spend it. Because you don't have physical currency in the bank, you need this protection so that your "digital money" can't simply be copied.
2. Advantages of Cryptocurrency
So we have this magical money that is only available online, isn't owned by anyone and uses clever maths to make it secure. At this point, you're probably asking yourself why you should care, especially if you're not planning on investing in it - which seems to be the main reason that people are excited about it, right? Not necessarily. There are plenty of advantages for the average person to use crypto.
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No one can stop you from using cryptocurrency, you are in control. On the opposite end of the spectrum, organisations can and do stop you from using centralised currency. Banks can freeze your account, prevent a transaction from going through and control the value of your money if you earn overseas funds.
It's virtually impossible for hackers or other attackers to shut the network down.
It's cheap and fast
When you transact with someone on the other side of the world, your crypto will be with them within seconds. It will also cost you just a at a fraction of an international bank transaction.
3. What is blockchain technology?
Simply put, blockchain is a database that is actually not tied specifically to crypto. However, because it was used to launch Bitcoin, the original cryptocurrency, it has developed a reputation as being a crypto platform. This digital database functions like a ledger where you can record almost any type of asset, from goods and services to just about anything else.
A key differentiator from other "ledger-type" platforms is that blockchains are append-only, meaning you can only add information. You can't click on a cell and delete the contents - in fact, you can't change the content in any way. Compare that with Google sheets where you can continuously go back in and edit entries.
Another differentiator is that each recorded entry - called a block - is chained to the next entry in chronological order, hence the name blockchain. In other words, it's like a mapping system where each entry contains information from the previous entry, meaning if you had to change one block, it would have a domino effect on all the others and would be immediately obvious. This is why blockchain records are theoretically unchangeable, making them extremely secure.
Crypto for beginners conclusion
Now that you have a basic understanding of the key terminology, you're ready to learn about the different types of cryptocurrencies and why everyone is so darn excited about trading them. Read on for part 2 in our crypto series, Bitcoin and Beyond.