Cryptocurrency Basics

Cryptocurrency is the name given to digital currency in which the techniques of cryptographic encryption are employed to sustain the operations of the currency. The first cryptocurrency ever created was Bitcoin and it was officially released to the public in January of 2009 by an anonymous creator. The programmer, or possibly programmer(s), who released Bitcoin went under the pseudonym "Satoshi Nakamoto," and still remain anonymous to this day.

The idea behind bitcoin was to create a truly peer-to-peer electronic payment system, enabling trustless transactions and ensuring privacy. Nakamoto wanted to produce a currency independent of any central authority, instantly transferable electronically and with extraordinarily low transaction fees. He initially proposed the concept in a whitepaper published to the cypherpunk mailing list, it was entitled Bitcoin: A Peer-to-Peer Electronic Cash System. The paper set forth the concept of the blockchain, proposing a digital currency which would be self-sustainable through a complex system of mathematical proofs that would secure the network and verify transfer of funds.

Bitcoin transactions are verified by a network of physical hardware nodes, each transaction is verified and recorded into a distributed public ledger called the blockchain. Today, these nodes run on application-specific integrated circuits designed for solving blockchain verification codes, enabling massive computational power for the sole purpose of mining Bitcoin. Mining enables the generation of new units of currency which reward miners and keeps the network running smoothly.

Blockchain Technology

Bitcoin was certainly a great advance in technology. However, the most innovative feature of bitcoin was actually the blockchain itself. The technology underpinning the blockchain was capable of doing so much more than bitcoin was utilizing it for. Because the blockchain is an irreversible, tamper-proof public record repository for documents, contracts, properties and assets, it can be used to embed information and instructions with a wide range of applications. Examples include multi-signature transactions, smart contracts, and smart assets.

The true potential of the blockchain came closer to reality in 2014 when a brilliant young programmer named Vitalik Buterin developed an innovative new cryptocurrency called Ethereum. Widely recognized as "Bitcoin 2.0" at the time, the project gained a lot of traction and raised over $18 million in funding. Ethereum was capable of doing everything that Bitcoin could and then some. There are two primary defining factors of Ethereum: Smart contracts and the ability to create decentralized applications on top of the network. Ethereum effectively created an all-in-one tool that utilized blockchain technology to its fullest. Programmers were able to develop assets on top of the Ethereum blockchain, benefiting from Ethereum’s existing infrastructure and not having to develop an entirely new blockchain from scratch. This created a mutually beneficial relationship in which each new ethereum asset contributed to the overall demand for ether itself. If you are looking for a way to think about Ethereum's value proposition, you can think of Ethereum as if it were the Apple app store: Apple does not actually make the apps but each new application added to the app store adds value to Apple, and although Apple takes a cut, the developers benefit greatly from leveraging the existing infrastructure of Apple's app store and the underlying technology it provides.

Smart contracts are another key feature which made Ethereum the giant it is today. They have enabled the growth and development of the Ethereum network, having been utilized everywhere from prediction markets to cloud computing. However, the power of smart contracts has only just scratched the surface and there are still many new ways to capitalize on this immensely innovative technology. Ethereum has opened the door, and it may be leading the way, but there is growing competition. Not all cryptocurrency startups want to build on top of the Ethereum blockchain. These companies have different visions regarding how to fully utilize blockchain technology. The increase in competition has led to a market of its own, alternative cryptocurrencies.

Alternative Cryptocurrencies

Alternative cryptocurrencies develop their own custom blockchains designed to perform specific tasks such as content distribution, decentralized exchanges, or they just want to use different programming languages to perform certain functions more efficiently. Although technically anything other than Bitcoin is labeled an "alternative cryptocurrency," Ethereum's newfound dominance in the markets is quickly changing that perception. When people think of alternative currencies, or "altcoins," they rarely associate with Ethereum anymore. Today, altcoins are a market of their own, they are the wild west of investing. Bitcoin and Ethereum have clear value propositions while the majority of altcoins are mostly just tools for speculation. The risks are high but so are the rewards, the alternative cryptocurrency market is a fast paced and exciting world full of opportunity, but danger lies at every turn.

Smart assets are just making their public debut, the technology is still new and opportunities are ample. (Example of a smart asset innovator is NEO) Cryptocurrency is emerging from the realm of concept and into the mainstream, providing many new business and investment opportunities. From the internet of things to prediction markets, blockchain technology has a lot of room to grow. If you are willing to take the risk, it is an exciting time. The industry has experienced growth at unprecedented levels and many of the most brilliant minds and leaders of industry believe that cryptocurrency may prove to be the "second coming of the internet for financial technologies."

OUR MISSION

We hope to offer sound advising and assistance to prospective investors interested in the rapidly emerging industry. We want to help new investors navigate and understand the complexities of the decentralized marketplace. From value creation to risk management, we want to be there for you at every step of the way to help you make the best investment decisions possible.