In fact, most people now know very little about virtual currencies such as Bitcoin and Ethereum. They are just attracted by the market. If you want to invest in something, you don’t even know what it is, it is very dangerous. So
let’s first talk about the basic knowledge, what is virtual currency, virtual currency exchanges and virtual currency trading platforms. I believe that many people only learn about virtual currencies through Bitcoin, so I will take Bitcoin as an example in this article.
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1. What is virtual currency?
1) What is Bitcoin
Simply put, Bitcoin is money, a new type of currency.
Many people will have questions at this time, isn’t currency that only the government can issue is legal tender that can be circulated? Isn’t Bitcoin challenging the authority of the government? Even if it is not a scam, it will be blocked by the government. Don’t draw this conclusion so early. After understanding the operating mechanism of Bitcoin, your judgment may be different.
2) How does Bitcoin work?
In order to make it easier for you to understand the difference between the operating mechanism of virtual currencies such as Bitcoin and banks, I will give examples:
In fact, a bank is a centralized ledger, and data is stored in the bank’s central database.
|For example, if Ah Qiang transfers a sum of 5,000 yuan to Ah Biao through the bank, then Ah Biao’s account balance is 10,000 yuan, and Ah Qiang’s account balance is 2,000 yuan. The operation process of this transfer is as follows:|
①Abiao went to the bank account to make a transfer request;②The bank confirms Abiao’s identity through account, password, etc., and checks whether the account balance is sufficient;③After passing the check, add a transfer record in the system: Abiao’s account transfers 5000 yuan to Aqiang’s account, and the balance of Abiao’s account is changed to 10000-5000=5000 yuan, and the balance of Aqiang’s account is 2000+5000=7000 yuan.
The entire transfer process is actually that the bank adds a transfer record to its ledger and modifies the account balances of both parties. Because the bank has absolute control over the account book and the modification of the account book, this is a centralized account book.
The operating mechanism of Bitcoin is similar to that of banks. The difference is that Bitcoin does not have a central organization. It is jointly controlled by the participants of the entire Bitcoin network (that is, computers running Bitcoin client software, also known as nodes).
As with the example above, if Aqiang transfers 1 Bitcoin to Abiao, then the whole process is like this:
|①Aqiang broadcasts the transfer request to the surroundings: Aqiang’s account transfers 1 bitcoin to Abiao’s account and signs with Aqiang’s private key (the function of the private key is to prove that you have the right to use the money in this account. The password is almost the same).②The surrounding nodes first verify Aqiang’s “identity” (check the authenticity of the signature through Aqiang’s public key), and then check whether Aqiang’s account balance is sufficient.③After checking, the node writes on its own ledger: Aqiang’s account transfers 1 bitcoin to Abiao’s account, and the balance of Aqiang’s account is modified.④The node broadcasts the transaction to the surrounding nodes, and then spreads it from ten to ten, until all nodes have received the transaction.|
So Bitcoin is actually a ledger, and this ledger is a blockchain. Unlike banks, the Bitcoin ledger is open and transparent. Every node can modify and check the ledger. Of course, this ledger cannot be modified casually. If a node wants to modify the ledger, it must get the network The approval of some nodes can be displayed on the public ledger.
3) How to issue virtual currency-take Bitcoin as an example
The legal currency of a country is issued by the central bank of that country, so the virtual currency does not have a central institution like the central bank. How should it be issued and how should it be withdrawn?
As I mentioned above, Bitcoin is a decentralized ledger. Since it is a ledger, a bookkeeper is required. The bookkeeper will not work for free. If you want to keep accounts, you must give “money” (that is, Bitcoin).
This is the Bitcoin issuance mechanism, which generates new Bitcoins by rewarding those nodes who have worked hard to “bookkeeping”. These nodes are usually referred to as miners.
However, although every node can verify the authenticity of transactions, not every node can “bookkeeping”. This “bookkeeping” power requires competition, that is, through complex mathematical calculations and qualified random numbers. (Nonce). This is why Bitcoin mining requires higher and higher computing power allocation, and the need to consume more and more electricity.
4) Is virtual currency valuable-take Bitcoin as an example
The legal currency of a country is issued by the central bank of the country and is endorsed by the government, so we will naturally recognize their value, but Bitcoin is just a thing produced by a program, how to measure its value?
Speaking of this, we have to mention the nature of currency. The essence of currency is credit. For example, fiat currency is the government’s credit endorsing it. As long as people believe that something has monetary value, reach a consensus and are willing to use it for transactions, then this thing is also a form of currency. However, Bitcoin is only recognized in the Bitcoin community, not recognized by the whole society, and there is no legal endorsement. From this perspective, at least Bitcoin does not have the same social status as legal currency.
Virtual currency not only attracts IT customers, but also becomes the new darling of the investment market. Now we sort out the advantages and disadvantages of virtual currencies and find out the reasons why investors are flocking, and then you can judge for yourself whether to stay on the sidelines or enter the market now.
①If it is lost, it cannot be recovered
The password of virtual currency is difficult to remember, and if it is lost, it cannot be recovered.
②Unable to track
Cryptocurrency uses a decentralized network that cannot be tracked, so some criminals can use cryptocurrency to launder money. This is also one of the reasons why cryptocurrencies are widely controversial in the international arena.
③The price fluctuates greatly, and the investment risk is high
Many people now regard virtual currency as an investment commodity. Virtual currency, like stocks, is more affected by market sentiment, and is a high-risk investment product with large price fluctuations.
①The transaction line is simple and transparent
Many cryptocurrencies such as Bitcoin are based on the blockchain, and traders can view all transactions on the blockchain, and the transaction data cannot be changed.
All transactions are conducted through anonymous identities, making it easy to track whether there is any false or theft.
If a country’s government issues additional currency, that country will face inflation. But the total amount of virtual currency is constant. For example, Bitcoin, only 21 million can be mined, and it is not controlled by the central authority. No one can increase its quantity, which can avoid currency devaluation caused by spamming;
The above has introduced so much basic knowledge about virtual currency, I believe that everyone’s understanding of virtual currency is becoming clearer and clearer. The following are the top five cryptocurrencies based on the market value of virtual currencies in 2019. You can determine which currency to trade.
First place: Bitcoin-Bitcoin-market value of 830 billion US dollars
I have been using Bitcoin as an example to introduce virtual currencies above, and the market value of Bitcoin is actually well-deserved Nr.1. Founded in 2008, Bitcoin is the first cryptocurrency in history. The information of the founder is still unknown, and it is only known that his/her pen name is Satoshi Nakamoto.
Bitcoin is a digital currency based on distributed ledger technology (blockchain), and its most obvious feature is decentralization. If you want to pay 1 BTC to a friend, both of you can directly trade peer-to-peer without involving any intermediaries.
|Bitcoin advantages||Bitcoin disadvantages|
|—Bitcoin, as the oldest cryptocurrency, has the largest development and investment community.-There are many places and channels for bitcoin trading. For example, many top exchanges and wallets have launched bitcoin.-At present, Bitcoin is becoming more and more accepted in the mainstream economy. For example, the world-renowned companies Bloomberg, Microsoft, Overstock.com, Expedia.com and many other companies have begun to accept BTC payments.||—The transaction speed is very slow, and the Bitcoin transaction time is about 10 minutes—Bitcoin mining requires a high computing power configuration and a large amount of power consumption.-Bitcoin transaction fees are also relatively high.|
The market value of BTC in 2021 is $830 billion. Bitcoin is the starting point of the cryptocurrency world and the most popular cryptocurrency.