13 questions about crypto-currencies

1. What is cryptocurrency and what is their main difference from conventional currencies?

Cryptocurrency is a kind of virtual money that is created directly on a computer network. A unit of cryptocurrency is a coin. It is protected from forgery, as it is encrypted cryptographically. Cryptocurrency is issued in a computer network and is in no way connected either with the usual currency or with any state currency system. The cryptocurrency has no administrator, it is not backed up. The rate of cryptocurrency can not be regulated by a third person, it depends only on the balance of supply and demand in the market.

2. What is the difference between crypto and bitcoins?

There is no difference, except that cryptocurrency is the general name for the type of currencies, while bitcoin is the first to properly exist. Since bitcoin is one of the types of cryptocurrencies, today it is the most popular and expensive. Today on the market, you can count about 1,000 cryptocurrencies. But their total number is very difficult to accurately name, because new ones appear constantly, and some of the existing ones do not find popularity and actually cease to exist.

3. How do they arise? 

Cryptocurrency is generated during an action such as mining. The production of cryptocurrency can not be blocked, transactions can not be canceled, and all data is stored in a common database. This uses blocks that arise during the creation, for example, bitcoin. The whole process provides complete anonymity. Therefore, it is impossible to trace the transaction chain.

4. What is mining? 

Mining is a method of obtaining a virtual cryptocurrency.
Mining makes it possible to work on the infrastructure of the detachment. In a distributed network, there are no central servers that would regulate them, all the calculations for the operation of the network are made by the users themselves. There are several different methods of issuing cryptocurrencies.

The most popular today is called PoW - Proof of Work. Often, whole farm factories are being built for mining, most of which are in China today. Mining by the principle of PoW is beneficial only in countries with cheap electricity. Some new cryptocurrencies use other, much more energy-efficient methods of emission. For example, PoI (Proof of Importance) or PoS (Proof of Stake). Then the reward of the miner is determined not by its computing power, but by the activity of the trades or simply by the amount of currency on the balance sheet.

5. Is it legal?

In some countries bitcoin is legalized at the state level. The leaders of the market, in terms of creating a favorable environment for Fintech and Cryptocurrencies are Japan, Switzerland, Singapore. In Switzerland, cryptocurrency companies do not require any special permits or licenses, and the digital currencies themselves are treated as property, not debt. In Singapore, cryptocurrencies are considered assets, not financial instruments, while transactions are not regulated in virtual currencies.

6. Why did the crypto currency frighten all the states?

Because many states do not know how to work with the new phenomenon of the XXI century. Also, many governments and central banks do not want to lose power and monopoly over the turnover and issue of money.

7.How are the cryptocurrency used in the banking business?

To date, no banking system is operating systematically with cryptocurrency. There are several states that have expressed their readiness to create a national cryptocurrency: Japan, Singapore, Russia, Estonia, Switzerland, Sweden. Cryptocurrencies can be used in the banking business to make regular and p2p-payments. The digital currency will enable consumers to make instant payments in stores, while the costs of making such payments will be significantly lower than existing methods.

8.Is it secured in real exchange than they are provided?

It is  impossible to talk about securing cryptocurrency in the usual sense of the word. Unlike traditional money, the issue of which is controlled by state financial institutions and which are provided with gold and foreign exchange reserves, there is no single center for cryptocurrency. That is, the technology underlying the crypto-currency, block, is by definition a decentralized system. Probably, we can say that the crypto-currencies are provided with the power of a distributed computer network.

9. Is it possible to earn money on this?

Of course you can. We see that the rate of the most famous cryptocurrency is growing continuously. If in May of this year one bitcoin cost 2 thousand dollars, today its rate is 7 thousand dollars up. Other cryptocurrencies are cheaper in absolute terms, but they show even more confident growth. Given the fact that it is becoming technically more difficult to mine the cryptocurrency, and demand exceeds supply, it is possible that the value of cryptocurrency will, despite periodic falls, continue to increase.

10. Why does the course skip?

If the cost of fiat money is influenced by various external factors - political events, government actions and stock speculations, then the course does not affect the currency. For example, after the referendum in 2016 due to the withdrawal of the UK from the European Union, the pound sterling rate fell to the values ​​of 1985, and the election of US President Donald Trump had a negative impact on stock quotes around the world, but this did not affect the bitcoin rate - it continued to grow .

Nevertheless, several times we have already seen how the rate of bitcoin after a prolonged growth has significantly dropped. The rate jumps, because volumes are not too big and an investor with several million dollars can easily loosen the exchange glass.

11. What was the reason for the popularity of cryptocurrency?

It's role here played both ideological and commercial-speculative components. According to the original idea, bitcoin and other cryptocurrencies are anarchic means of payment, independent of states and central banks. In fact, this is an attempt to realize the dream of Friedrich von Hayek about the system of competing private currencies. These ideas have not yet been fully realized due to the extreme volatility of the cryptocurrency, which makes it difficult to use them as payment instruments. But high volatility attracted a lot of investors to cryptocurrency.

It's cumulative capitalization is now about 196 billion dollars. But the number of people entering this market is constantly growing, and with it the exchange rates are also growing.

12. Is there a future for cryptocurrency in Russia?

National states have not yet decided how to treat cryptocurrencies. On the one hand, this is an objective scientific and technical breakthrough, which is difficult to simply take and prohibit. On the other hand, according to its original idea, cryptocurrencies pose a challenge to national states and can weaken their influence. For governments this is a difficult situation, and Russia is not an exception. In 2017, tough measures were taken in the United States and China to put the cryptography under control, or even ban some of its aspects (the prohibition of ICO in China).On the other hand, Japan adopted a relatively liberal act on the legal status of the Cryptocurrency. It's hard to say which way Russia will go. The last statement of Russian President Vladimir Putin caused a positive response from market participants to the cryptocurrency.

13. Can I get a cryptocurrency?

If it is a question of purchase, then there are no difficulties with it. It is enough to register on the crypto-exchange (in Russia, often, this does not even require passport data), to place ordinary money there, to place an order for the purchase of a cryptocurrency at an acceptable price, wait until it turns out, and withdraw the cryptocurrency into your wallet. If it is a question of mining, its complexity depends on the specific currency that you want to mine. So far this is legal and profitable in terms of electricity consumption. But if you want to receive notable amounts of at least several tens of thousands of rubles, then you will face such complexities as overheating of the room with computers and increased fire danger from a large load on the electrical wiring. In such cases, you need to carefully calculate the power consumption, carefully assess the capabilities of your power grid and, perhaps, even rent a separate room.

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