US-Senator Thomas Carper once said, “Virtual currencies, perhaps most notably Bitcoin, have captured the imagination of some, struck fear among others, and confused the heck out of the rest of us.”This quote accurately describes most of our reactions to the popularization of cryptocurrency. This innovation has revolutionized the way we can exchange money in return for goods. It is a new way to invest and make a lot of money, as many have become millionaires by investing into cryptocurrencies such as Bitcoin. This digital currency has confused most of us. But, not to worry, as here is an introduction for beginners about the world of cryptocurrencies.

A little background

For twenty years, many attempts had been made by developers to create digital cash exchange systems, but no one had succeeded until 2008. The creator of the widely known cryptocurrency is SatoshiNakamoto. His original idea was an online-sharing platform, which quickly developed into a digital cash exchange method. A whole new kind of currency had emerged. Bitcoin launched in 2009, and by 2015 it had become a recognized medium of exchange.

What is ‘cryptocurrency?’

What exactly is cryptocurrency? Cryptocurrency is described as, “a digital or virtual currency that uses cryptography for security.” Cryptography, in basic terms, are the codes and encryptions' used to protect and authorize users. This is how cryptocurrency also successfully secures and transacts virtual money. Examples of popular cryptocurrencies are Bitcoin, Ethereum, Litecoin and Stellar.

How does it work?

How does it work? Well, let’s put it this way: decentralized entities that create an avenue for people to use digital currency as a medium of exchange. Never been done before and thus it was daunting for most, but it has proven to be an effective way to make transactions without double spending or spending invalid amounts. It works as each person who uses this system creates an accumulated list of all their transactions, to keep a record. Simple, is it not?

What is ‘mining?’

We have all heard this term being used a lot when discussing cryptocurrency. In the simplest of terms, mining is a way to figure out the algorithm of when the best time to invest in coins is. You need a computer and a specific software, a graphics processing unit that has been modified to do this task which was developed by enthusiastic miners. It has now become a business, with organizations investing a lot of money in the necessary hardware and software required to mine effectively.

Hopefully, this introduction to the complicated science of using cryptocurrency helps those of us who are confused by this process. Once you get the hang of it, using cryptocurrency can actually be very useful and can generate a lot of money for you. So, let’s start mining!