What Women Need to Know about Cryptocurrency
What is Cryptocurrency?
Let’s start by breaking the word into two parts: Crypto and Currency.
Crypto-represents the word cryptography –Which means using various mathematical techniques for encrypting and decrypting data to keep it private when transmitted or stored electronically.
Currency- represents a medium of exchange.
Put the two together and you understand that cryptocurrency is a way to send and receive digital money over the internet using encrypted codes. When you buy cryptocurrency, you are essentially purchasing a digital currency, made up of letters and numbers that you either keep as a store of value or use to transact over the internet.
What is the Appeal of Cryptocurrency?
One main advantage of using cryptocurrency as a medium of exchange is that there is no middleman involved in the transaction. For instance, if you go online to purchase a pair of shoes from Nordstrom, you will need to use a Visa type card or PayPal type account to pay Nordstrom because you can’t send literal dollars through your computer. Then you will need to pay off your Visa by withdrawing money from the bank.
On the other hand, if you use crypto currency, you just send your crypto directly to Nordstrom and your transaction is complete.
This first transaction involves “middlemen” like Visa and banks.
This 2nd transaction, using cryptocurrency,(encrypted code), requires no “middlemen.” It is a peer-to-peer transaction; like being in the same room with your friend and paying her cash out of your pocket for her awesome shoes.
The Blockchain Ledger
Where is Cryptocurrency Stored?
Most of us keep our dollars at a bank. However, cryptocurrency does not need to be stored at a bank. Cryptocurrency is stored on a ledger called the Blockchain. You may have heard this term-Blockchain. I used to think it was the same thing as cryptocurrency, but it isn’t. Instead, blockchain is the technology that cryptocurrency uses. Blockchain is essentially a ledger, a big spreadsheet, on the internet that records every cryptocurrency transaction. Each time a cryptocurrency transaction occurs. this ledger is uploaded to a network of computers worldwide whose job it is to verify the transaction. Once the transaction is authenticated, the ledger is added to previous ledgers. Creating a chain. Thus, the term blockchain. When you buy cryptocurrency, you don’t physically receive it, instead, your crypto is stored on the blockchain ledger and you are given a special key, called a private key to access your crypto on the blockchain. I will explain more in my next blog how this private key works and what it is exactly.
Illustration of the Blockchain at work
Paige wants to buy some cryptocurrency from Josh.
She starts the transaction, and it goes on the blockchain ledger over the internet.
This ledger is then uploaded to a network of computers who verify that the transaction is true, that it really is from Josh.
Once the transaction is authenticated, it becomes part of previous ledgers (or blocks) and thus becomes part of the blockchain.
Paige will receive Josh’s crypto in the form of a private key (an encrypted code) which will gives her access to her cryptocurrency that is stored on the blockchain.
The Blockchain
The Three Pillars Of Blockchain
The Blockchain is a decentralized way of storing and exchanging currency. No one entity is in charge. No one government can manipulate the currency on the blockchain and there is no bank in charge of recording the transactions.
The blockchain is public, meaning anyone can view the blockchain ledger. In fact, Bitcoin’s blockchain ledger can be found here: https://www.blockchain.com/explorer Imagine, if the Government used a blockchain ledger to record all its transactions, we could literally see where all our tax dollars are being spent.
Transactions on the blockchain are immutable, meaning irreversible. Once transactions are verified and added to the blockchain, they cannot be reversed.
A Revolutionary Technology
As I was researching cryptocurrency, I became very excited about the Blockchain technology. Many believe it will completely change how we store data and transact with each other over the internet. Blockchain technology may be as revolutionary today as the Internet was in the 1990’s. There are a vast number of applications on the blockchain beyond cryptocurrency. For instance, voting- blockchain’s immutability would enable secure voting, eliminating voter fraud. We could also use the blockchain to safely store our identity paperwork such as passports, drivers’ licenses and even vaccination cards. Even though the blockchain is public, no names are shown on the ledger, only numbers and letters which are associated with the owner. Real estate transactions could use the blockchain. Imagine if you could pull all the data about a certain property off the blockchain, eliminating the need to pay others to gather the paperwork, like title insurance companies. Another application is in the medical field. Patient medical records could be securely stored on the blockchain and safely shared between medical professionals. Basically, anything that was once stored on paper can now be recorded on the blockchain, creating an infinite and unchangeable “paper” trail of ownership records, programmable contracts, financial information, personal data and much more.
Researching cryptocurrency and the blockchain technology has been fascinating for me. If you want to know more, stay tuned for next week’s blog where I discuss Bitcoin, it’s history and its future and learn how to buy cryptocurrency. If you would like more information about cryptocurrency and to find out how it fits in with your current investments, please contact me for a free 30-minute consultation.
Marathon Wealth Management, LLC is an Investment Advisor registered with the State of Washington. All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy, or the completeness of, any description of securities, markets or developments mentioned. We may, from time to time, have a position in the securities mentioned and may execute transactions that may not be consistent with this communication's conclusions.
