You may be familiar with cryptocurrencies, like Bitcoin, Ethereum, and others, as they have been trending in the news lately. But you may not know who really makes crypto coins, or who’s behind the scenes running the show. In this article, we’ll take a look at the history of cryptocurrency and some of the major players behind the scenes creating these digital tokens that are revolutionizing how we think about money and what makes an economy run.
Developers – Core code development
Most cryptocurrencies are open-source, meaning that anyone with the requisite skills can contribute to their development. In the case of Bitcoin, for example, there is a core team of seven developers who work on improving the protocol. However, because Bitcoin is open-source, anyone can submit bug fixes or proposed improvements to the codebase.
Mining – Bitcoin creation and transaction verification: Miners are responsible for creating new bitcoins and verifying transactions. In order to mine bitcoin, miners must dedicate significant computational power to solving complex math problems. This process is known as proof of work.
Community/Advisors – Consensus building
The cryptocurrency community is often decentralized and made up of volunteers who work together to maintain the network. They also help to promote the coin and build a community around it. The people who create and manage a cryptocurrency are usually anonymous. However, there are some notable exceptions like Ethereum’s Vitalik Buterin. Many cryptocurrencies have an advisory board that can guide new features and changes within the currency. These boards are typically not anonymous and their members include influential figures in technology such as Zooko Wilcox-O’Hearn from Zcash or Brian Forde from MIT Media Lab’s Digital Currency Initiative. There are many crypto enthusiasts who voluntarily contribute to these networks. For example, the Bitcoin Wiki was created by one person, Michael Marquardt, known as theymos on bitcoin talk forums.
Investors – Providing funding to get started and market exposure
In cryptocurrency, coins are made through the process of mining. Mining refers to having verifiers and committers commit transactions to the public ledger. To be a miner, you need special equipment and software, plus an investment in physical computing power. There is a time investment involved with crypto coins as well. Mining these can take anywhere from two months to two years or more before you start seeing any return on your investment. If you put a large amount of money into building out your mining operation, then it will take a long time to break even. This can be influenced by the cryptocurrency prices. The higher the price, the more miners are more likely to make cryptocurrency coins. After they produce a crypto coin, they must sell it right away because it isn’t like sitting on cash. Some people get into mining not just to earn money but also because they enjoy the rush of competitiveness. I am reminding you that you should never feel secure investing in cryptocurrencies, because it’s all dictated by the whims of the market right now.
Miners – Run nodes to validate transactions
Miners are responsible for ensuring that transactions on the blockchain are valid. In order to do this, they run nodes which act as sort of a check and balance system – each node validates a transaction before it is added to the blockchain. If just one node were to validate a fraudulent transaction, it would be rejected by the other nodes and would not be added to the blockchain. This makes it very difficult for someone to commit fraud on the blockchain. Some miners also participate in what’s called mining pools where they contribute their processing power to solving complex math problems in exchange for a share of the coins mined.
Mining pools allow miners with less computational power (processing power) to get more coins than if they mined solo. However, these smaller rewards add up over time so it can be an effective way to earn crypto coins without having to invest much money. A miner will have an easier time getting new bitcoins when they first start out because there are fewer people competing for them but as the bitcoin network grows, it becomes harder and harder.
Exchanges – Connect buyers and sellers (buy BTC with your credit card!)
Centralized exchanges are the most popular way to buy and sell crypto. They work like traditional stock exchanges, with buyers and sellers coming together to trade based on the current market price. Some of the most popular exchanges include Coinbase, Binance, and Kraken. However, there are also decentralized exchanges (DEXes), which are peer-to-peer platforms that let you trade directly with other users. DEXes have become increasingly popular in recent years as they offer more privacy and security than centralized exchanges.
Mining – verifying transactions & adding new blocks to the blockchain: Bitcoin mining is how new bitcoins are created. Miners are rewarded with BTC for verifying transactions and adding new blocks to the blockchain.
Traders – Buy low sell high
Most people think that traders are the only ones making money off of crypto coins, but that’s not always the case. While it’s true that traders can make a lot of money by buying low and selling high, they’re not the only ones profiting from the volatile world of cryptocurrencies. Entrepreneurs who start their own blockchain company also make profits from their initial coin offerings (ICOs). For example, Ethereum’s ICO raised over $18 million in 2014. Plus, developers also benefit from building new decentralized apps on top of the blockchain platforms created by entrepreneurs. However, for every successful cryptocurrency project there are many more that never get funding. It all depends on how good your idea is and how well you market it to potential investors.
ICOs – Raising capital from investors.
Cryptocurrency is a digital currency created by computers to provide an extra layer of security. One of the key characteristics of cryptocurrencies is that they are decentralized, which means governments and financial institutions do not control them. The process of creating cryptocurrencies is known as mining, in which computers solve complex mathematical problems to verify transactions and add new coins to the blockchain, a digital ledger of all cryptocurrency transactions. Miners receive payment for their work. There are also some cryptocurrency exchanges that allow users to buy and sell cryptocurrencies such as Bitfinex, Bitstamp, Coinbase (exchange), Kraken, Poloniex, and Gemini. Using these platforms, traders can buy and sell cryptocurrencies using different fiat currencies or Bitcoin.