It is no longer a secret what a cryptocurrency is, how it was invented, what it is, what it is and why it is needed. We are all in the subject here, because every day we read something, learn and try something new, many of us even buy and sell this same cryptocurrency, and someone even mines it and trades on exchanges. But I'm more than sure that each of us has a mom / dad, grandmother / grandfather, a dog / cat, a girlfriend (or a guy who likes it better) or a "moron" best friend who spoils all the photos that they don't know what it is. Although they probably heard the news from the zombie box on national channels that some kind of bitcoin is breaking all records and a bright future is predicted for it.

If you try to tell any of them that cryptocurrency is a digital currency created with the help of cryptography, that it is decentralized and based on blockchain technology , and then also mention about public and private keys,

Therefore, let's try to describe everything in simple language so that everyone already understands what a cryptocurrency is?

And the easiest way, in my opinion, is to draw an analogy with what people are already familiar with. In this case, they will already roughly understand what is at stake and they will not have a feeling of rejection of the new and incomprehensible.

What is Cryptocurrency? Brief Introduction:

Cryptocurrency is a currency, it is money, it is like rubles and dollars, but the only difference is that this currency is electronic or virtual. Virtual money cannot be touched or sniffed, but it can easily be exchanged for the usual paper wrappers. Therefore, having a bank card, we already have electronic money on it, but thanks to ATMs and nice women cashiers, we can get this electronic money in our hands in the form of crisp banknotes. With cryptocurrency, everything is exactly the same - it is only a set of 1 and 0, but after a series of manipulations on our hands we may have dollars, euros, rubles, or some kind of product or service.

Everything is clear with the currency, now let's deal with the first part of the word - "crypto". It's short for cryptography, and this is what Wikipedia tells us:

Cryptography is the science of confidentiality (the impossibility of reading information by outsiders), data integrity (the impossibility of imperceptibly changing information), authentication (verifying the authenticity of authorship or other properties of an object), as well as the impossibility of repudiating authorship.

Hence, the cryptocurrency is so named because it was developed with these requirements in mind. It is protected and cannot be forged, i.e. you cannot be the owner of fake money. Although no, there are heroes who succeeded:

Cryptocurrencies are different, just like regular fiat money. In the real world, we know dollars, euros, rubles, hryvnias, yuan, kroons and much more. And each such currency has its own value, that is, 1 dollar is not equal to 1 euro and vice versa. Similarly, in the world of cryptocurrencies, of which more than a thousand have already been created.

But the one who will be interested in what cryptocurrency is, most likely, will ask about one, about the most important - about bitcoin. And you, in turn, will hardly cite any altcoins as an example. Therefore, the first thing to tell is how to pronounce the name of the coin correctly. And how many times have I been asked the question "What kind of bitcoin are you?" or "Do you already have Bcoin?" - do not even remember.

Where does cryptocurrency come from?

We figured out the definition, and even our grandmother already understands that her pension on the card is also electronic money, for which she buys milk in the store. But then the question arises: if the state pays the pension, which in turn takes money for this in ... (and a long chain went, where did the candy wrappers come from), then where to get this cryptocurrency and who is responsible for it?

The answer "Well, there like miners mine it and all that" is unlikely to help you understand the whole essence of what is happening, but it is very possible to draw an analogy with gold mining.

For beginner miners:

There are diggers, seekers, miners - you can call it whatever you like - who are mining gold. They use pickaxes to shred ore in mines or wash river sand. After the grains of this metal are found, it is sent for processing and then we can already find it in jewelry, ingots or coins. Gold can either be bought for fiat money or then sold.

For cryptocurrency, everything is exactly the same: there are "miners" (albeit without picks and headlamps), they are usually called miners who use their computers to solve complex mathematical problems and for the correct solution they are awarded a certain amount of coins, which can then be spent on what something, or sell. If you are not such a miner, you can easily buy these coins using your grandmother's bank card, who has not yet spent all the money on milk. But solving mathematical problems every day becomes more and more difficult, and coins are given less and less, and the total number of these coins is limited. Everything is straight, as with gold, which is also not infinite.

Where to store cryptocurrency?

Where do you keep your fiat money? Something is wrong on a salary card, from where you can then remove a part so that some small change is in your pocket, something in banks, and something under the pillow or in the safe at home. These are all classic schemes that are also relevant for cryptocurrencies.

There are various ways to store your virtual cryptocurrency. Generally, cryptocurrencies are stored in e-wallets, like the eToro Bitcoin Wallet. You may have a wallet application on your smartphone, with which you can pay for purchases on the Internet, in shops, in cafes (yes, some already accept cryptocurrency). Also, you can have a wallet program on your home laptop, where some of your coins, and different ones, will be stored. After all, just like under the pillow, you can put a couple of dollars and euros, and in such a multi-wallet you can throw several different cryptocurrencies.

Multicurrency crypto wallets:

If you expect significant amounts of money, then there are also crypto banks - these are services on the Internet with the function of "cold" storage. You transfer your coins to them, and they store them on servers that are disconnected from the network. Those. No one has access to them, except for the employees of this bank, and even then not all of them. And when you want to pick them up, just make a request to withdraw your coins. If you do not trust banks, that is, crypto safes, you can buy a special device that looks like a USB flash drive, transfer your money to it and then hide it in a safe place.

Cold storage of cryptocurrency:

As you can see, all the storage and preservation methods that you are used to are also suitable for cryptocurrencies. Yes, at first glance, they are a little more complicated, but at the same time they are more technologically advanced, because the world does not stand still - everything is moving forward!

Is cryptocurrency taxable? 

Many laws have been introduced since cryptocurrency has become more popular. Depending on the amounts, and when you withdraw any funds, it can be subject to cryptocurrency taxes. Make sure you contact an accountant with experience in this realm before making any large transactions.

How to pay with cryptocurrency?

To begin with, let's take a look at how settlements are now carried out in the usual ways - in cash and cards.

When buying milk in a store for cash, you simply give it to the seller and that's it - the payment has been made.

If you pay for purchases using a bank card, that is, make an electronic payment, then everything is more complicated. Although many do not even think about what actions occur in this case, because everything works quickly and easily. Here's a rough diagram:
  • The buyer makes a payment by card at the store.
  • The store sends a request for this operation to its bank (for example, Alpha).
  • Alpha sends a request to a payment system (for example, Visa).
  • Visa gives the go-ahead to the buyer's bank card (for example, Omega) for this operation.
  • The money from Omega goes to the Alpha account.
  • Alpha transfers money to the store's account.

With cryptocurrency, things are as follows. It uses direct money transfers from one person to another. There are no intermediaries and third parties like bank cards in this system.

Let's consider this scheme in a nutshell using an example. You already have a crypto wallet with cryptocurrency on it. The seller tells you his details (this will be a special address) where the money should be transferred. You send the required amount from your wallet to this address, after which your transfer (transaction) appears on the seller's wallet, and you, in turn, receive the product or service.

As you can see, everything happens in much the same way. But, as with cards, we don't need to know the entire internal process of transferring funds to use cryptocurrencies. Therefore, I think it's not worth telling my grandmother about the fees for transferring and confirming transactions , about the mempool and blockchain, this will already be unnecessary information for an initial acquaintance with the new technology. Gradually, this information can be added to stories, but the main thing is with simple examples and using analogies to show that cryptocurrencies are about everything that already exists, only a little differently, since progress does not stand still, and, therefore, to be afraid it's not worth it.

Where is cryptocurrency accepted?

"What can I buy for cryptocurrency and in which stores do they accept it?" - such a question you will most likely also hear and answer it as easy as shelling pears. If you are going to make payments on the Internet, then you can pay with cryptocurrency for almost everything:

If you want to go on vacation, no problem - buying a plane ticket and booking a hotel is as easy as using a bank card. The network is full of stories about how people made almost round the world, paying with bitcoins. And there are more and more services offering tickets and hotels for cryptocurrency every day.

If you want to buy something from technology, its easy - a new smartphone and home theater will be gladly sold to you for cryptocurrency.

You need to pay for products in an online store with home delivery - and this can already be done, provided that you live in a certain country.

With offline payments, things are a little worse so far. It only takes time to fully implement. But there are already restaurants and cafes that accept cryptocurrency, although there are not so many of them. And a number of countries are already actively using cryptocurrency in everyday life, for example, the same Japan: the points where bitcoins are accepted can no longer be counted on the fingers of one hand, there are already hundreds and thousands of institutions where it has become possible. Well, the news that real estate and cars are sold for cryptocurrency, we see with enviable regularity.

Offline infrastructure is still in its infancy, but its development is progressing by leaps and bounds. Cryptocurrencies are becoming more widespread every day. Therefore, the hour is not far off when they will become as commonplace as a plastic card.