Answers to Go
SAN MARCOS PUBLIC LIBRARY
625 E. HOPKINS ST.
512-393-8200
Q.Can you explain what “cryptocurrency” means?
A. Cryptocurrency (crypto) is a medium of exchange (money) that is digital, encrypted (coded) and decentralized. There is no centralized government control and there is no “middleman” like a bank to manage transactions. It is a peer-to-peer system. Bitcoin was the first crypto, and it has triggered alternative currencies to appear.
There are basically a few things you can do with cryptocurrency. You can use cryptocurrency to make purchases, but it’s not a form of payment with mainstream acceptance quite yet. You may also use crypto as an alternative investment option outside of stocks and bonds. “The bestknown crypto, Bitcoin, is a secure, decentralized currency that has become a store of value like gold,” said David Zeiler, a cryptocurrency expert and associate editor for financial news site Money Morning. “Some people even refer to it as ‘digital gold.’” (What is Cryptocurrency? Forbe’s Advisor, retrieved 9/16/21 from forbes.com/advisor/investing/what-iscryptocurrency/)
Experts hold mixed opinions about investing in cryptocurrency. Because crypto is a highly speculative investment, with the potential for intense price swings, some financial advisors don’t recommend people invest at all. Cryptocurrencies, unlike most established currencies, can be very volatile and change value frequently. More than 10,000 different cryptocurrencies are traded publicly, according to CoinMarketCap.com, a market research website. (What is cryptocurrency? Here’s what you should know, Nerdwallet, retrieved 9/16/21 from nerdwallet.com/article/investing/cryptocurrency-7-things-to-know#1.-what-is-cryptocurrency)
Additionally, you can mine cryptocurrencies. Mining uses your computer to help run the networks that back crypto assets. Running a function on your computer or hardware automatically and continuously after it’s set up, mining generates revenue and helps to validate the transactions that are carried out on the blockchain, depending on the computing power designated.
Virtual currency is created through mining. In cryptography, a hash function uses a complex algorithm to convert a message into an unbreakable code. The resulting coded message is called a “hash value.” Mining crypto requires finding the message that results in a certain hash value. The crypto’s source code records the creation of new coins and trading of coins in a block of data. A new block is released in what is known as the “blockchain,” at a rate predetermined in the source code. The block contains all the payment transactions, including the origin and destination addresses and amount, made since the previous block was released. Miners race to solve the puzzle, which verifies the block of peer-to-peer transaction data and awards the number of coins predetermined in the source code. As more miners join the network, mining becomes more difficult and specialized computers are needed. (Johnson, D.D., Virtual Currency, 2017, Gale virtual reference library:
Encyclopedia of Emerging Industries 7th ed., Gale, TexShare Databases. Credo Reference Database.) By spreading its operations across a network of computers, blockchain allows Bitcoin and other cryptocurrencies to operate without the need for a central authority. This not only reduces risk but also eliminates many of the processing and transaction fees. Put simply, a blockchain is a list of transactions that anyone can view and verify. Blockchain is just a database. Its name derives from the fact that it stores information in large blocks, which are chained together. Blockchains are a crucial part of modern financing. This is because they can store vast amounts of information that’s shared between multiple parties. As such, they’re often utilized as virtual ledgers. (Miser, Erick, July 16,2021: What is Cryptocurrency? Read Us 24x7, retrieved 9/19/21 from readus247.com/what-iscryptocurrency/#What_ Is_a_Blockchain)
NOTE: In researching this column, I used open sources from the Internet (different web pages). I also used the library’s TexShare Databases, including the Small Business Reference Center and Business Abstracts and Full Text. To use the library’s TexShare Databases, call the library at 512-393-8200 for the login information.
Suzanne Sanders is the new columnist for the library. She is the Community Services Manager for the San Marcos Public Library and came from the Austin Public Library in 2015 after having served there as a librarian for over 20 years. She gratefully accepts your questions for this column.
