Cryptocurrency

2010, price of 1 bitcoin = $0.39

2019, price of 1 bitcoin = approx. $7800; Rs. 1,371,084.00

As you can see if you had invested Rs 70 to buy 1 bitcoin back in 2009, you would have been able to receive Rs 1.3 Million in 2019

What is Cryptocurrency?

One of the main examples for cryptocurrency is bitcoin. In simple terms, Bitcoin is a digital currency. Non-digital currency is fiat currency which is the normal rupee and dollar notes that we use daily.

Bitcoin was created by a person or  a group of people who collectively call themselves Satoshi Nakamoto.

What is Blockchain?

Let me explain what blockchain means in simple terms.

Modern communication has allowed people to communicate directly. Texts, voice mails, emails travel instantly from one to another. But when it comes to money, we need to rely on a 3rd party for security.

If we need to transfer $100 to someone in Canada, we would have to do it through a bank. Blockchain challenges this mechanism by removing the third party. Blockchain uses math and cryptography to provide an open decentralized database of any transaction involving value. This can be money, goods, property on even votes. These transactions’ authenticity is verified by the community. All these transactions will be recorded on a public and distributed ledger which can be accessed by anyone who has an internet connection. So how is a decentralized database kept? This is done by having decentralized nodes rather than having a centralized system like the bank. These distributed nodes share the ledger which means all cryptocurrency users have a ledger and updates to the ledger are independently constructed and recorded by each node. The nodes then vote on these updates to ensure that the majority agrees with the conclusion reached. This voting and agreement on one copy of the ledger is called consensus and is conducted automatically by a consensus algorithm. Once consensus has been reached, the distributed ledger updates itself and the latest, agreed-upon version of the ledger are saved on each node separately.

What is Blockchain Mining?

Mining is the process of adding transactions to the large distributed public ledger of existing transactions, known as the blockchain. Mining involves creating a hash of a block of transactions that cannot be easily forged, protecting the integrity of the entire blockchain without the need for a central system.

Miners validate new transactions and record them on the global ledger (blockchain). On average, a block (the structure containing transactions) is mined every 10 minutes. Miners compete to solve a difficult mathematical problem based on a cryptographic hash algorithm.

Mining is NOT about creating new cryptocurrencies. Mining is the mechanism that allows the blockchain to be in a decentralized security.

Miners receive a reward when they solve a complex mathematical problem. There are two types of rewards: new bitcoins or transaction fees.

Some of the other Cryptocurrencies available

• Ripple (XRP)
• Ethereum (ETH)
• Litecoin (LTC)
• Bitcoin cash (BCH)
• Zcash (ZEC)

How to purchase cryptocurrency?

In Sri Lanka, you can use several methods to purchase cryptocurrency

• Through a Website called Localbitcoins. This site allows us to buy and sell bitcoins with other local users. Mode of payment can be bank transfer or card payment.
• Through a Website called Paxful. This too allows you to buy and sell bitcoins globally. The mode of payment can be Paypal, Moneygram, mobile recharge.

My personal favorite is this site called cex.io. This site allows you to buy and sell most cryptocurrencies and is not limited to bitcoin. To perform a transaction, create an account and register your credit card. Any credit card wouldn’t do the trick and you would need an HSBC credit card for this (based on research). Its simple to use and offers many valuable features like price charts and wallet management.

Rtr. Hasitha Jayasuriya