As technology begins to play a major role in business, the advent of a new currency known as cryptocurrency could not be better timed. Cryptocurrencies such as bitcoin and Ethereum are the future of trade and, at the moment, they are steadily spreading their reach not only in Canada but the word at large. Due to the use of blockchain technology, cryptocurrency is entirely digital and decentralised. No central bank manufactures it and no financial institution regulates its use.
Cryptocurrency’s peer to peer nature ensures that it remains safe and cannot be stolen, without the wallet ID of a user making it relatively safe. Units of cryptocurrency form a blockchain, and each piece is assigned to a user. When a user wants to make a transaction, or transfer cryptocurrency to another user, the peer to peer network checks to make sure that you actually hold the currency you are trading, then updates its records on the entire network.
Once a transaction has been confirmed on a cryptocurrency site, it is irreversible. In a centralised system such as a bank, only one location gets checked and that is your account, and you can request that your bank cancels a transaction. They may not be willing to, but they do have the power to if they so choose. On the other hand, cryptocurrencies are based on a cryptographic algorithm. While their records are held by millions of people worldwide, those people, have no way of seeing or tampering with the blockchain. If someone tries, other peers on the network will correct the false entries, or even blacklist the offending peer.
How to Buy and Trade Cryptocurrency in Canada
If you are wondering how to buy bitcoins in Canada or how to buy Ethereum, currently the most popular cryptocurrencies, all that’s needed is access to a wallet. A wallet is a generated hash called an address, to which you can send or receive cryptocurrency. Though your wallet address is on the decentralised network, only it’s owner can request or send currency using it. However, it is important to note that you should NEVER send cryptocurrency more than once from the same wallet, and you should never reveal your address to others. This means that if you are trading bitcoin, you need to have more than one bitcoin wallet.
For example, if George wanted to send you bitcoins, you both would generate a new bitcoin wallet. He would send some bitcoins from his cold storage address to your temporary wallet, then the rest to a new wallet, which he does not reveal. His old address becomes obsolete. You would send the coins from your temporary address to your cold storage address, and the transaction would be complete, without either party learning each other’s private address. This is how to buy bitcoins in Canada and the world. Of course, since cryptocurrency is unregulated, and transactions are irreversible, unless George knows and trusts you to give a promised payment, such as goods or money, you could take George’s cryptocurrency and walk away. This is where cryptocurrency exchanges come into play.
Cryptocurrency exchanges are somewhat trustworthy middlemen that act as brokers. You can trade one cryptocurrency for another, or sell it for cash. The irony is that cryptocurrency exchanges are often centralised, and therefore are vulnerable to exploitation. Thus, it is essential that you don’t store cryptocurrency in a centralised exchange, but only deposit it as needed.
More so, it’s important to realise that cryptocurrencies are not valued against each other, but a central cash system, usually USD. All cryptocurrencies and official currencies fluctuate rapidly, and exchanges charge fees for every transaction and conversion. Before you decide on a cryptocurrency exchange, you should research it online. Social media hubs like Reddit, forums, and even Facebook are filled with discussions on the advantages and disadvantages of various exchanges.
An example of a platform to buy or sell cryptocurrency is Coinsquare. Coinsquare is a Canadian exchange which features trading in Litecoin, Ethereum, Bitcoin, and precious metals. Despite having to convert to USD, all listed prices are in CAD, and they allow you to withdraw in CAD as well. Though Coinsquare is a centralised exchange, 95% of their cryptocurrency is kept in cold storage – and only taken out when at specific intervals to process transactions, before being put back into cold storage. Coinsquare is relatively secure and user-friendly.
How to Mine CryptoCurrency
Though the process differs for each type of currency, the fundamentals of bitcoin mining, and all other cryptocurrencies are the same. A Cryptocurrency mine acts as a decentralised hub where currency and transactions are stored – and are used to process and confirm transactions.
For new currencies, miners are responsible for generating new hash blocks of cryptocurrency, which are then verified with other miners. For established currencies – with every new ‘unit’ made it becomes harder to generate a new one – and miners act more like a ledger than a ‘mine.’ Those who keep ledgers are rewarded for the use of their hardware, but the time/energy/profit quotas of mining decrease the longer a cryptocurrency exists.
Ironically, despite being a decentralised system, the longer a cryptocurrency exists, the fewer miners are willing to act as peers, and the more centralised a system becomes. Individual miners will opt to move to new, more profitable, cryptocurrencies, leaving established cryptocurrencies to become managed by centralised data centres.
Cryptocurrencies are becoming more and more important not only in Canada but most parts of the world. Governments are rushing to find ways to regulate them before they cause an economic collapse. Cryptocurrencies are not insurable, and if an exchange goes down, all of your funds are lost. They are violable and are still in their infant years.
Though it is arguable that you have complete control over your currency if no one is willing to exchange it, it is valueless, and any money you invested is lost. More so, in the event of an internet blackout – you lose all access to your cryptocurrency. Cryptocurrencies like bitcoin, grew initially in value primarily through the black market but it can be perceived that a few years from now, the black market will not be the only way the currency can attain value.
Cryptocurrencies have gained legitimacy over the years, and are starting to be accepted by more and more businesses. Legal exchanges can not exist without the trust of their users, and that trust has to be earned by providing consistent and reliable service. As the internet continues to stand strong and is becomes more stable every year, many experts believe that cryptocurrencies will hold strong and become a powerhouse for world trade.