Explaining to someone what cryptocurrency is can be a tedious task. As we move towards another year of further mass adaptation, the questions will keep coming in. That is why we asked out dear family and friends to ask us their crypto questions, compiled them and answer them here, ready to send to your loved ones, helping guide them through the onboarding process.

What is cryptocurrency?

Cryptocurrency is a digital asset. It is an internet-based medium, that uses cryptography to secure financial transactions, control the creation of additional units and to verify the transfer of assets. It is maintained by a peer-to-peer community computer network, which is made up of users’ machines or “nodes”. 

An important feature of cryptocurrency is that it is not controlled by any central authority. It is decentralized so governments can not control or interfere with the blockchain.  

What’s it used for?

With cryptocurrencies, they let you buy goods and services or trade them for profit. Since you are not using banks, you do not have to pay for bank services. You end up cutting the ‘middle-man’. Money is truly your own, rather than owned by a bank. Since all transactions are confirmed on a public ledger, all identities of coin owners are encrypted to ensure the legitimacy of record keeping. For example, you can see if money is being moved and to where making it ‘fraud-proof’. 

Is crypto what people who kidnap and blackmail use?

In the news, there have been several cases where kidnappers will use cryptocurrency as ransom. The most recent case was a Norwegian woman, names Anne-Elisabeth Falkevik Hagen who went missing October of 2018 and has not been seen since. Her kidnappers asked for a sum for her release. They wanted this money to be transferred via Monero, a cryptocurrency that does not have a visible blockchain, so no one can see who has sent money or has received the sum. 

This would be much more difficult with Bitcoin, as the blockchain is public. So if the ‘kidnapper’ wants to convert their money to fiat, it would be possible for law enforcement to track who they are. 

Although it has happened, it is not common. Over the history of fiat currency, we have seen it happen hundreds, if not thousands, of times. 

How does mining work? How do you actually make a new bitcoin for example?

Bitcoin mining is the backbone of the Bitcoin network. A miner is a specialized computer that solves algorithms, that create bitcoin. Kind of like mining gold, but fewer people get hurt. Without Bitcoin miners, the network would be insecure and dysfunctional. The miner’s role is to secure the network and to process every Bitcoin transaction.

For this service, miners are rewarded with newly-created Bitcoins and transaction fees. Miners are securing the network and confirming Bitcoin transactions. Miners are paid rewards for their service on average every 10 minutes in the form of new bitcoins.

Can whoever make their own cryptocurrency and why would you?

Yes anyone can create their own cryptocurrency. Making an altcoin can be easy and there are several websites that allow you to put a name on a coin. That being said, if you want to make a more ‘legit’ coin, you should create yours on a blockchain. This takes a lot more work and expertise. 

There are many reasons why people create their own cryptocurrency. If they are creating a project that requires a blockchain you can have your own digital currency to incentivize the nodes. With a currency, it is easier to understand the blockchain essentially. Other aspects include eliminating fraud ricks, cutting down operating costs, offering immediate transactions and ensuring an immediate pool of potential customers., 

How do you buy cryptocurrency?

There are several exchanges where you can go and buy, sell and trade cryptocurrency. The easiest solution is perhaps to buy Bitcoin on Coinbase. Here you can also buy Bitcoin Cash, Ether and Litecoin. To join Coinbase you need to fill out the details and complete a KYC (Know your customer). You will have to take a picture of your ID, either a passport, Driver’s License or Photo ID. Then you will need to take a picture of yourself. 

This procedure is very similar to that on other exchanges. It is important to note that Coinbase charges a relatively large fee for the purchase of coins. Once you have the coins, you can choose to keep it on the exchange or put them on a cold wallet.

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