Hideki Kiyoko - Bitcoin and Cryptocurrency Technologies: The Ultimate Guide to Everything You Need to Know About Cryptocurrencies

Bitcoin And Cryptocurrency Technologies

The Ultimate Guide To Everything You Need To Know About Bitcoin And Other Cryptocurrencies

Written by Hideki Kiyoko

Copyright 2017 by Hideki Kiyoko - All rights reserved.

It is not legal to reproduce, duplicate, or transmit any part of this document in either electronic means or in printed format. Recording of this publication is strictly prohibited.

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INTRODUCTION TO CRYPTOCURRENCIES

I n recent years, there has been a lot of talk about Bitcoin. Weve heard from news media about the dangers of it, while seeing various websites discuss the importance of it, from hobbyists who became wealthy overnight.

Its fair to say that there is a lot to Bitcoins (BTC). Starting off, there are many alternatives to BTC, and these virtual currencies fall under the description of Cryptocurrencies (CC). Dont worry if you feel lost already. The great thing about this book is once you read it cover to cover, you will know a great deal about CC and BTC, enough to explain it to others.

Understand, however, that this book will give you the Good, the Bad, and the Ugly of CC. This is everything you need to learn when it comes to CC, which means that you need to know what many might call the less desirable information . This book is not a get rich quick scheme and does not promise that you will do well if you engage in the CC markets. Think of this book more like a textbook that goes over everything in relation to CC (specifically BTC), and includes some helpful advice on what you need to do to get your feet wet.

What Is Money?

A book like this, you might think wed explore what is CC first since that is what this book is about. Due to the complexity of CC, we need to go over some basics of what money is, and how value works. A brief understanding of money, and how its value is derived will give you a great foundation when we go into the details of what CC is, and how it compares to the current Fiat Currency we have in the world.

In the strictest sense, money is an item that can be used to acquire goods or services, and can repay debts. Throughout history, those objects have ranged from rocks to metals, to even paper. The value of money was based on how much of a resource a civilization had, a resource they placed much value on. Perhaps one of the most popular was Gold.

NOTE: You may have taken note of the use of the word item. With CC, this is a virtual currency, which is already a notable difference.

Gold makes for an excellent resource to base money on, due to it being scarce. It rates as the 72nd most common element on Earth, out of 78 natural elements, found at a rate of 1.1 parts per billion. Gold belongs to a group of metals known as the Metals of Antiquity, being one of seven metals known to mankind until the 1800s. Becase of that, Gold was very difficult to counterfeit, as it was the densest metal. For this reason, it used a variety of cultures as a metal coin, which a type of economy known as a Gold Specie Standard .

Many cultures started out with Gold Specie Standard, which the value of the currency was based on Gold coins in circulation. The fewer coins there were, the more valuable it became. This had a lot of flaws, and many societies evolved to use Gold Bullion Standard , that while there werent Gold coins, the value of currency could be exchanged for Gold.

NOTE: Before the 1970s, many countries of the world based their economy on the value of the USD, which was a Gold Bullion Standard. Richard Nixon moved to a Fiat Currency, which all those countries stopped basing their currency on the USD.

While there were other metals used than Gold (i.e., Silver), Gold proved to be a valuable resource to use for currency. As mentioned before, it was difficult to counterfeit, but more importantly, it could maintain a fungibility. Fungibility means that one Gold coin could be directly compared to an identical Gold coin, and both have the same value. It also had a low spread, which could prevent hyperinflation .

What drove the value of Gold was its scarcity. Because Gold is so rare, it is difficult to find (often requiring to mine deeper into the Earth, which makes it dangerous to mine), which drives up its value. While Gold is valuable for other reasons (such as making wires, put in glass, dessert topping), the fact that it was hard to find made it a much sought-after item, and the need for many to hoard it as much as possible. If not hoard it, then to make it into art to show off how rich someone was.

As great as Gold is, it has its drawbacks. While scarcity drove value, this was a bad thing. With a limitation of Gold that society had, eventually the economy would become stagnant. There was only so much that people could use the Gold for, especially if more wealthy individuals kept the Gold and didnt spend it.

For the economy to grow, the society had to get more Gold. This has usually been the main reason for a community to go to war. While there were other resources valuable to get, Gold was one of the top resources they hoped to gain. More than just war, many societies set out expeditions to unknown places in hopes there would be Gold there, and wanted to be the first to find it.

What ended up being of great value to society was Gold Rushes, as they could add to the economy, and the people of society would try to strike it rich (most failed) in finding Gold, which would be given to the government. These things were done to improve the economy and add more money to society.

NOTE: Gold Rushes could boost the economy of an area, but would quickly dissipate. Silver Rushes were known to maintain the economy of an area for a much longer time.

Eventually, many nations in the 20th century have switched from representative based money to Fiat currency. Fiat currency is that which is not backed by a resource (like Gold), but a government body determines its value. A government decides what the value is, and creates the money they need to, though only about 10% (on average) of the money is actual paper and coins.

NOTE: Fiat is a Latin term, meaning: let it become; it will become. Primarily used for official orders.

As with many things featured in this book, this is a basic explanation of these concepts. Unlike other topics in this book, only a basic explanation of money will be given, as this book is not about how money works, but the ins and outs of CC.