Solving the mysteries of cryptocurrency in Franklin County

Cryptocurrency.

It’s a fancy word, and in a very very simple way, it’s just a method to send money around to pay off debts, buy things, or hold money.

The difference here is that it’s done electronically, and not in a bank or credit union.

Here’s how it works – in a very very very very basic way:

A group of people put regular currency into a pot. Let’s say everyone puts in $100. That gets everyone $100 worth of the cryptocurrency. For this explanation, lets use a made-up cryptocurrency called TestCoin.

When someone in the group of TestCoin holders buys something from someone else, the TestCoins move from one person’s wallet to the other. So if Al buys a burger from Jo for 10 TestCoins, those Coins go from Al’s digital wallet to Jo’s.  That gets marked in both of their ledgers, as well as into everyone else’s ledgers.

That is the strength of this kind of Coin. Everyone who is in the TestCoin network has a ledger that shows all of the transactions for everyone else in the network. That way, if something gets messed up with one person’s ledger, there are thousands of copies of the correct ledger, and the messed up one can be corrected.

There is an extra wrinkle here – the ledgers are all security protected through encryption. So they are encoded so that you can’t just go in and change your wallet from 100 coins to 10,000 coins. It is this encryption that is a part of what is called ‘mining’ for cryptocurrency. Mining is basically getting a computer to do complex math to allow more encryption to happen. Sometimes, that results in a reward, but every time it results in a pretty hefty electric bill to run the computer that hard for that long.

For some people, the other reason to use currencies like TestCoin is that it is not controlled or tied to any one government. They see it as a completely free and democratic currency that allows money to flow freely.

The thing to watch out for with the ‘regular’ cryptocurrency is that its value can move, sometimes by quite a lot, through the course of a day, week, or whenever. The factors that cause it to move are hard to see sometimes. This change in value stems, at least in part, from the fact that there is not any actual value to the currency itself aside from what someone else is willing to pay for it. You might buy TestCoin for $1 per coin, but if someone offers to buy them at $5 per coin, the value can go up, but also come back down if the offer to buy coins is only 25 cents per coin.

The other version of cryptocurrency is called stablecoin. This works the same way as far as the ledger and exchange of value, but in this case, it is tied directly to something that has a more stable, static value, like the US dollar.  So, if the folks at TestCoin wanted to issue a stablecoin, they would need to hold the same number of dollars in reserve as they want to issue StableTestCoin.

This is a lot to take in. It looks like it’s pretty safe, right? The records of…