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Understand the basics of investing with our guide to assets. Learn what an asset is in our day and age.
An asset can be described as a resource or item that provides future economic benefits to the individual, corporation, or country that owns it. Assets have long had a place in a company's balance sheet, but today take on a broader identity when associated with the broader financial sector. From financial assets to assets that provide future economic value, below we outline everything you need to know about assets.
What does the term "asset" mean?
Assets can refer to an item or resource that holds economic value, with the individual, company, or country that owns it being able to expect future monetary benefits. Assets can be held to maintain liquidity or sold to make a profit. These assets are usually assigned a dollar value upon which their liquidity or potential profits can be judged.
Assets owned by an individual are referred to as personal assets, while assets owned by a company or corporation are referred to as business assets.
Assets are used to increase net worth, raise business value, and more. Assets can be physical or intangible, such as gold or Bitcoin. Individuals and companies alike use assets as a means to provide and prove solvency, financial health, and equity. They can be used as liquidity to secure loans or can be sold to make a profit. Business success probability is generally worked out by subtracting liability from total asset value.
An asset can be considered a resource that in the future can generate cash flow, whether it's manufacturing equipment or a patent.
Assets can be categorized into current assets, fixed assets, tangible and intangible assets, operating assets, and non-operating assets.
How do assets work?
Individuals, companies, and governments accumulate assets with the expectation that they will provide short-term or long-term economic gains in the future. Assets do not promise gains though, as assets can either appreciate or depreciate in value, with gains only realized after the sale. This volatility can affect the sale value and change the overall solvency of a person, corporation, or country.
Solvency implies that the assets held are enough to manage or pay back outstanding liabilities. Companies usually use a balance sheet, covering current assets, liabilities, and equity, to evaluate how the held assets suffice against their liabilities. But before we delve deeper into the broad topic of assets, let’s dissect the current most common types of assets.
Types of assets
There are 6 main examples of assets that can be broken down into the categories listed below. The definition of assets is broad so one asset may fit into one or more asset classification categories. These are the most popular types of assets.
Current Assets (business assets)
Current assets can quickly be converted into cash, otherwise referred to as liquid assets, and are used to pay bills or settle liabilities promptly. Some examples of current assets include but are not limited to cash and cash equivalents, accounts receivable, inventory, or prepaid expenses.
Fixed Assets
Fixed assets, otherwise referred to as non-current assets, are assets that are purchased for long-term use, more than 12 months usually, and are not likely to be converted quickly into cash. These assets hold future economic benefit. Some examples of fixed assets include land, buildings, or equipment.
Tangible Assets
Tangible assets refer to assets that you can see and touch, also known as physical assets. These types of assets would be considered as cash, inventory, buildings, stock, machinery, or furniture.
Intangible Assets
Intangible assets refer to an asset that lacks physical substance, the opposite of tangible assets, and can not be touched or seen. Types of intangible assets would be considered as intellectual property, patents, cryptocurrency, licenses, grants, and secret formulas.
Operating Assets
Operating assets refer to assets owned by a business for daily operations or to generate revenue through usage. Some examples of operating assets include but are not limited to inventories, patents, equipment, secret formulas, and licenses.
Non-operating Assets
Non-operating assets refer to assets that are not necessarily used for business activities but may still create profits in the future. Some examples of non-operating assets include vacant land, marketable securities, short-term investments, and long-term investments.
Definition of an asset
As already discussed, the definition of an asset is too broad, and even when broken down into categories does not captivate the true potential. While patents are considered an intangible asset, with rights usually stored digitally, it is also vital operating asset for some businesses.
Bitcoin is another example of an asset breaking barriers, considered an intangible asset, stored digitally. Bitcoin could also be referred to as a current asset, or liquid asset.
Inventory is a current, tangible, operating asset. It can be one or all at the same time. This just goes to show there is no one definition of an asset or asset type, but it is rather up to how the investor chooses to use said asset.
But it is important to remember that tangible assets can not be intangible assets. Current assets can not be fixed assets. And operating assets can not be non-operating assets. There may be some exceptions, but this is a general rule to remember.
Assets vs liabilities
Whether you are working out an entrepreneur's net worth, or a company's value, liabilities play a massive role in the solvency of an individual, cooperation, or country. When you minus liabilities from assets, you can work out Fund Balance, also referred to as Net Assets or Equity.
In order to figure out a company's fund balance, you would need to evaluate its balance sheet. Viewing their balance sheet depends on whether the company is private or public, with public companies being legally required to provide their balance sheets in annual reports.
To put it simply: Assets - Liabilities = Equity
Understanding assets and their economic value
The definition of assets is limitless, even the sapphire necklace you inherited from your grandmother could be considered a current and tangible asset. The value of the necklace could be profited from immediately, or you could wait for a sapphire shortage to claim even more.
The basics of assets within personal and professional lives differ, and we hope through this article you could come to a greater understanding of the differences and similarities.
Assets remain an item or resource that a person, business, or government can expect to generate a cash flow. Whether it be a fixed or current asset, the goal of acquiring assets is to eventually profit from them. Gold, Bitcoin, houses, cars, secret formulas, and patents are all classed as assets, rightfully so, as they have the ability to generate value in a cash equivalent.
Now that you know more about assets, and the value they are supposed to hold, do your own research and find an asset that fits your investment needs and wants.
Exploring the blockchain platform that's taking the industry by storm with its unparalleled speed, security, and scalability. Discover the features and potential of its innovative cryptocurrency ALGO.
In this article, we’re exploring the most recent addition to the list of supported cryptocurrencies on the Tap App, one of the highly esteemed top 20 cryptocurrencies based on market cap, Algorand (ALGO).
What is Algorand (ALGO)?
Algorand is a decentralized blockchain platform that supports the development of a wide range of dapps (decentralized applications). The platform has been used to create dapps across industries like real estate, copyright, microfinance and more. Launching the same month as its ICO, the Algorand mainnet officially went live in June 2019.
The Pure-Proof-of-Stake (PPoS) network was created to improve efficiency and transaction times within the crypto space, as well as reduce transaction costs. With no mining (due to the PPoS consensus), Algorand represents a more sustainable and energy-reserving contribution to the space.
A unique aspect of the platform is that as new ALGO enter circulation with the creation of each new block, the newly minted coins are distributed to everyone who holds a certain amount of ALGO in their wallets.
While the project is relatively new, it has received the backing of big names and has seen impressive company interest. In June 2021, Arrington Capital bet $100 million on the platform after launching a fund supporting initiatives building on Algorand, while fintech infrastructure provider Six Clovers launched a cross-border payment system on the platform.
The platform was also selected to host the Marshall Islands CBDC.
Who created Algorand?
The blockchain platform was created by Silvio Micali, a highly regarded contributor to the crypto space and recipient of the 2012 Turing Award. The MIT computer science professor was recognised for his fundamental contributions to “the theory and practice of secure two-party computation, electronic cash, cryptocurrencies and blockchain protocols.”
The Algorand whitepaper was co-authored by Stony Brook University professor Jing Chen.
When first conceptualised in 2017, Micali wanted to create a platform that not only provided digital transactions but also tracked assets like titles and property. The platform also allows for the creation of smart contracts (decentralized digital agreements) and tokens.
How does Algorand work?
The Algorand platform is divided into two layers: layer 1, responsible for ensuring the network’s security and compatibility, and layer 2, responsible for more complex developments.
Layer 1 supports asset creation, smart contracts, and atomic swaps between assets while layer 2 is reserved for more compound smart contracts and dApp development. These two layers allow the network to process transactions more efficiently, with simple transactions taking place on layer 1, while more complex smart contracts are executed off-chain.
Through the pure proof of work consensus, the two-phase block production is conducted through a propose and vote system where users who stake ALGO are randomly selected to validate and approve each block as it is created. Stakers only need to hold 1 ALGO in order to generate a participation key necessary to become a Participation Node.
These nodes are coordinated by Relay Nodes which are not actively involved in the verification process but are responsible for facilitating communication among the Participation Nodes.
The more of the native cryptocurrency a user holds, the more likely they are to be selected. This consensus ensures that the platform is secure, decentralized and able to process transactions in seconds as opposed to minutes (as on other networks).
Algorand is able to process over 1,000 transactions per second (TPS) and validate transactions in less than five seconds.
What is ALGO?
ALGO is the native token to the Algorand platform. As the newly minted coins are distributed to all users holding ALGO (whether on an exchange or in a non-custodial wallet) and not just the nodes verifying transactions, holders of the token are able to earn a 7.5% annual percentage yield (APY).
A total of 10 billion tokens were minted, with roughly 6.8 billion in circulation at the time of writing. These tokens are gradually entered into circulation through predetermined distribution channels. The token distribution for ALGO is as follows:
- 3.0 billion. To be injected into circulation over the first 5 years, at first via auction.
- 1.75 billion. Allocated to participation rewards.
- 2.5 billion. Allocated to relay node runners.
- 2.5 billion. Allocated to the Singapore-based Algorand Foundation & Algorand, Inc.
- 0.25 billion. Allocated to end-user grants.
How Can I Buy ALGO?
If you’re interested in accumulating this leading blockchain token, you can do so effortlessly through the Tap app. As part of a new string of supported tokens, Tap users will now be able to buy, sell, trade and store the cryptocurrency that everyone is talking about.
Discover the benefits and potential risks of Initial coin offerings and their role in funding blockchain projects. Discover the benefits and potential risks
ICO is an abbreviation for Initial Coin Offering, a term coined supposedly in 2013 yet only gained popularity in 2017. ICOs were created as a method of raising funds for cryptocurrency projects in a crowdfunding manner. When people partake in an ICO, through funding it, they receive "shares" of that project in the form of cryptocurrency tokens.
This method is set up to help new projects find funding to build their project, platforms, or products. It's very similar to investing in a start-up in the hopes of a project becoming bigger and better through your investment contribution.
Mastercoin was the first ICO recorded back in 2013, raising a grand total of 5,120 BTC. Shortly after, Ethereum followed, and in 2014 raised roughly $18 million to build their project. There is clearly a great deal of success to be seen through ICOs, so let's see what all the fuss is about.
ICO vs IPO vs IEO
Let's look at IPOs, or initial public offerings, to learn more about where ICOs originated.
Similar to ICOs, IPOs were created as a way of gaining capital to better the businesses' infrastructures. While they are similar to a crowdfunding aspect,the primary distinction is in how investors are rewarded. IPOs will offer their investors shares, while ICOs offer digital currencies that can be used within their ecosystems or can be sold when the price increases.
Now that we understand how ICOs and IPOs work, let's discuss the differences when it comes to IEOs, or Initial Exchange Offerings. Again, this is another method used to raise funds for upcoming projects, but there are some key aspects that make IEOs different to IPOs and ICOs. While IEOs are also a crowdfunding method in the cryptocurrency industry, they use an exchange. Anyone can generally buy tokens from an ICO page, whereas IEOs use exchanges as the distribution mechanism.
In order to take part in an IEO, you must be a registered user of the exchange that the project is utilizing. While IEOs may be more transparent, they do push us towards a more centralized approach. There are also IDOs, Initial Dex Offering, Dex standing for decentralized exchange (increasing the data privacy aspect), but that's a topic for another day.
How they work
So now we know what ICOs are and how they differ from their counterparts, but now let's delve deeper into how ICOs actually work. As stated, ICOs are a way for cryptocurrency projects to raise money. When a project decides to launch an ICO it will generally underline the sale dates, the participation rules, and the buying process.
Usually, investors will need to choose currencies they are happy to accept in exchange for their tokens, such as Mastercoin accepting Bitcoin. There are some ICOs who will also accept fiat currencies as payment.
The projects' core purpose, its timeline, and how much money is needed to succeed should be released in their whitepaper. If the project does not raise enough money to meet the minimum funds needed, the money should be returned to those who contributed. This would classify the ICO as unsuccessful.
If the funding goal is met, the project will continue to pursue its original goals and contributors will be able to claim their tokens further along. Tokens will either be listed on notable exchanges later on or will be distributed using smart contract technology,This is something you should do more study on before contributing to an ICO.
Advantages and disadvantages
While ICOs have proven to be a massive benefit to project developers, there are some underlying issues and risks that may come into play. In order to give you the best chance of understanding ICOs we will need to cover all the pros and cons that come with ICOs. So let's see what you have to look out for:
Pros
High potential profits
Accessible to anyone (unlike IEOs)
Money returned if unsuccessful (smart contacts)
Transparency on fund usage (Blockchain)
High liquidity
Cons
No intrinsic value
No legal guarantees
Potential fraud
Frequently asked questions
Now that we have covered the basics, there are some additional questions the internet has and we thought we would take the time to answer them for you. These are the most frequently asked questions about ICOs, and while we have answered some here is a more TL;DR breakdown:
What does ICO mean?
ICO stands for Initial Coin Offering, a phrase coined by the cryptocurrency industry.
What is the purpose of an ICO?
ICO is a method used to raise funds for up and coming projects, think of it as an early investment phase.
How do I get an ICO?
That depends on the ICO you want to partake in, you will generally need to sign up to the ICO, deposit funds, and wait for the tokens to be distributed either through an exchange or smart contract. This differs depending on the projects' ICO parameters.
Is Bitcoin an ICO?
No, Bitcoin required no funding, tokens were mined and sold without the need for crowdfunding.
How many ICOs are there?
There is no definitive number out there but consensus shows that there have been roughly over 7,000 businesses that have attempted ICOs.
Are ICOs safe?
This is a tricky question and depends greatly on the individual project that is hosting an ICO, whether they are using smart contact technology, and how legitimate the team behind it is. ICOs can be safe, but they also carry risks, it is always best to do your own research before investing.
As there is no universal authority on ICOs there is certainly a lack of regulation in the space so be sure to do thorough research before parting ways with your money.
Closing Thoughts
That is all the essential information you need to grasp in order to better understand what an ICO is. From the textbook definition to its competitors, how it works, and everything in between. ICOs are popular for a reason, they offer a range of benefits to both projects and investors, but you should keep in mind that there is no benefit without risk.
While we can explain what an ICO is, we can not tell you whether to invest in an ICO. It's important to vet the project for yourself and see if it aligns with your interests, and more importantly if it has all the key components for a legitimate project and token.
While the world is increasingly accepting of ICOs from both businesses and retail investors standpoints, there are several alternatives available. We briefly discussed IEOs and IDOs, but more crowdfunding methods have flourished from the origins of ICOs, so be sure to explore those out too. At the end of the day, we hope we helped you better understand what an ICO is.
Investing refers to the buying of an asset at a relatively low price and hoping it appreciates in value so you can sell it at a higher price.
Investing has become an increasingly important part of many people's financial plans, as it offers the potential for greater returns than simply leaving money in a savings account. By investing your hard-earned money, you can potentially build wealth over time and secure a better future for yourself and your family.
But what exactly is investing? Put simply, investing involves putting your money into assets with the goal of making more money. There are various types of investments available to individuals, from stocks and bonds to mutual funds and real estate investments. Understanding how each type works is key to making smart investment decisions that will help you meet your financial goals.
Investing can also involve investing in time and labor, especially when it comes to business operations. These investments are similar in that one expects to see returns. While no investment carries a guarantee, understanding what they are and how they operate will assist you in making smart financial decisions.
What is an investment?
When you invest, you're essentially trading current resources (like time or money) for an asset that has the potential to grow in value. Ideally, if you choose to invest in the right asset at the right time, your investment could gain value. As an example, when you trade on the stock market, you are buying stock with capital in the hope that in time the asset will grow in value and sell for more money than the initial capital investment.
There are plenty of different types of investments one could use to grow their money, from stocks and bonds to commodities and cryptocurrencies, as well as mutual funds and real estate properties. The concept behind every investment is that it will make more money for the investor in the long term.
A smart investment allows an individual to not only make money but increase their total net worth. However, it's crucial to remember that every type of investment is speculative and there is always a possibility you will lose some or all the money you put in. For example, if you purchase stock shares or a piece of property, the value could decrease soon after you buy it. For this reason it is imperative that one assesses their risk tolerance before investing in something so as not to lose money.
The definition of an investment is not constant and can change depending on the situation. For instance, in macroeconomics, investing refers to purchasing items now that will be used later to generate income. While a company or individual from one nation might invest in business properties located in another country, such as building a factory which is known as foreign direct investments.
What are the different types of investments?
With a variety of options available, each investment type carries its own potential for returns, risks, and other factors such as tax implications and management fees. Below we highlight several options available to the everyday trader that can be used individually or together as part of an investment strategy to contribute to their financial goals.
Stock Market
By investing in stocks on the stock market, you are purchasing fractional ownership of a public listed company. People generally invest in stocks with the aspiration that their value will have gone up by the time they sell them. In order to make a profit from selling stock, the price will need to have grown enough to cover any trading costs and transaction fees associated with the trade.
Investing in certain stocks might also make you liable to dividend payouts, where a company distributes profits to shareholders (holders of stock) based on the company's performance.
Read more about investing in stocks in our What Are Stocks article.
Mutual funds
Mutual funds are investment vehicles that pool the money of many investors and invest in a variety of different assets such as stocks, bonds, and other securities. A mutual fund is managed by an investment professional who makes all the decisions about where to put the money within the fund.
These professionals seek to maximize returns for investors while maintaining a certain level of risk. Mutual funds are a great way for investors to diversify their portfolios, as the fund’s holdings may include stocks from many different companies and sectors. Additionally, mutual funds reduce the amount of research required to make an informed investment decision since all decisions are made by the fund manager. Investing in a mutual fund may come with higher fees than other investments.
Bonds
By purchasing a bond, you are essentially loaning money to a government, company, or other borrowing entity. In return for your loan, the debtor (the bond issuer) is required to repay both the debt and any associated interest payments.
However, it's worth noting that on occasion companies and countries default on their bonds, meaning that they can't make scheduled payments to the bondholders which will result in the investor losing money. This is almost always a last resort option as these establishments know that defaulting will scare off investors going forward.
A bond is a fixed-income instrument that pays periodic interest payments until the agreed-upon end date when the final payment is made and the loan's original amount is repaid.
Commodities
Commodities are raw materials that can be traded for one another, such as gold, beef, and gas, expanding to foreign currencies and indexes. Funds that invest money in commodities will typically invest in resources such as precious metals (silver, gold), energy resources (natural gas, oil), and primary agricultural products (wheat).
Cryptocurrencies
Cryptocurrencies are digital assets that are operated on decentralized networks free from government or financial institutional control. While considered high-risk, several cryptocurrencies (such as Bitcoin) have shown incredible gains over the last decade. Various investment accounts in mainstream firms are starting to incorporate cryptocurrencies into their portfolio.
Other investment options (real estate investments, etc)
Other investment options include real estate, options, futures, and certificates of deposit.
Before investing in any of the asset classes mentioned above it is imperative that one understands the financial instruments and their own risk tolerance entirely, as well as the terms involved in the investment, the fees or transaction costs and the risks involved.
It is also important for savvy investors to understand the tax implications of their investments and the capital gains tax they might be required to pay on any investment returns.
How do investments work?
While each asset class might differ slightly, they all require an upfront investment of capital. The intention is that this will later create a return in a monetary form of higher value.
When investing in financial products such as bonds, stocks, or a mutual fund, investors will typically have to set up an investment account with a professional such as a brokerage firm or money manager. This person can then advise on which products to invest in and manage your portfolio.
Investing in real estate will involve buying a house, usually done by making a down payment or investing in real estate investment trusts. These properties can either be used to live in or rent out and generate future income. The intention here is that the house appreciates in value over a certain period of time and can later be sold at a higher price. Depending on the property and area these types of investments can range from high risk to low risk.
How investments drive economic growth
Investments are not just for personal or corporate benefits, they play a big role in driving the broader economy. Through factors like building consumer demand and job creation, investing can play a direct role in economic growth.
For instance, a company might decide to sell stocks and issue corporate bonds in order to raise capital. This capital can then be used to build a factory, create a new product line and hire new employees. This then drives the greater economy while also building the company's and investors' wealth.
In another example, governments might use the funds raised from corporate bonds to fund public projects, fix the roads, or build social programs in communities. Or individuals might use gains made from investments to further their education or save for retirement. With more income comes more consumerism, in turn contributing to economic growth.
How to start investing
If you're ready to start investing, you will first need to determine your risk tolerance and which asset class you wish to pursue. If you're just starting out, start small and grow instead of taking on too many things at once. Gaining an understanding of your risk tolerance will help you to navigate where start investing.
Research
Before you begin, ensure that you have a thorough understanding of the market you wish to invest in, and understand all the associated risks. Always do your own research, and don't rely on one outlet or individual to be the sole source of information. If the option is available, consider hiring a professional to assist you.
Understand market movements
Another important aspect to understand before investing is that markets will always have fluctuations. Even if they grow over long periods of time, they will still go through periods of increases and declines. Don't rely on past performances to dictate future outcomes.
Open an account
To get started in investing you will need to open an investment account that allows you to both buy and sell the financial instrument. Looking at investing in stock, some investors will open a brokerage account that will execute trades on their behalf, while others might use a portfolio manager who oversees all their investments. Always do your research before parting ways with your money.
Have your financial affairs in order first
While investing is designed to create wealth, it is important to have a grasp on your personal finance beforehand, and ideally have an emergency fund set up for any unforeseen expences (so that you won't have to tap into your investment accounts).
Conclusion
An investment is the act of buying an asset with the intention that it appreciates in value over time. Before people invest it is imperative that one establishes their risk tolerance to establish how much risk one has to navigate.
Investments can be managed by professionals or individually, depending on the investors preference. It is also important to note that return on investments will typically be imposed by capital gains taxes, depending on the jurisdiction.
Exploring the world's first and most popular cryptocurrency. Discover the features, benefits, and potential of this groundbreaking innovation.
It's never too late to learn about the new-age financial payment system. Bitcoin has become infinitely more popular with each passing year, and as adoption rates continue to rise, now is the perfect time to become familiar with the world's first and biggest cryptocurrency.
What Is Bitcoin?
Bitcoin is a peer-to-peer payment system that uses the internet to operate and not a centralised authority like all other currencies. This digital currency cuts out the middleman and instead allows users to send money directly to one another, eradicating high fees, lengthy application processes and time spent waiting for money to clear.
Instead of being operated by a bank, government or financial institution, Bitcoin is run by a network of computers around the world that all follow the same protocol to ensure the network operates smoothly. Blockchain technology forms the backbone of Bitcoin and ensures that all transactions are facilitated in a timely, transparent and immutable manner.
Bitcoin is a secure, decentralised, borderless payment system and form of digital currency that operates 24 hours a day, 7 days a week.
Bitcoin is often compared to gold as both assets have proven to be successful investments over the years. While regulation regarding cryptocurrency is still being ironed out, it still remains a widely adopted and heavily used payment system.
What Are The Benefits Of Bitcoin?
Bitcoin brought about an entirely new way to manage one's funds. With the use of blockchain technology and the internet, Bitcoin has become a thriving financial ecosystem over the years. Below we outline several benefits of using Bitcoin.
- Decentralised. The network is entirely free from centralised control, including stopping transactions, freezing accounts and requiring complex paperwork.
- Accessible. Anyone anywhere can tap into the Bitcoin payment system as long as they have an internet connection. The platform is fully inclusive.
- Transparent. While the network is considered to be "pseudonymous", all transactions are still recorded on a public ledger in real time, providing an entirely transparent ecosystem.
- Liquidity. Bitcoin can be traded on hundreds of platforms around the world, ensuring that its liquidity is always in the green.
How Does Bitcoin Work?
Using blockchain technology, the network of computers is able to facilitate digital asset transactions from one peer to another bypassing any middleman. Let's break that down.
Say Amal wants to send George 1 BTC. She will initiate this through her Bitcoin wallet by entering George's wallet address and the amount. Bitcoin is stored in digital wallets which have two important codes: one is the wallet address (known as the public key) and the other is the private key, a code only the owner of the wallet should know (similar to an ATM pin).
Once Amal has initiated the transaction, it will enter a pool of pending transactions on the network. From there, miners will "pick it up" and compete with one another to be the first to solve a complex cryptographic puzzle. The first one to do so will execute the transaction.
The funds will then leave Amal's wallet and be deposited into George's wallet. This will be recorded on the blockchain, a transparent digital ledger shared across the entire network, citing the date, time, wallet addresses and amount in a block, which are stored in chronological order. Each Bitcoin wallet's balance will then be updated.
Wallets typically require 3 confirmations before the funds can be spent. This means that three new blocks need to be added to the blockchain, each block representing a confirmation.
What Gives Bitcoin Its Value?
Bitcoin's value is determined by supply and demand, fluctuating in price when supply decreases and demand increases. When Bitcoin was created it was written into its code that only 21 million BTC will exist. By putting a cap on its total supply, the currency is naturally deflationary in value, the opposite of fiat currencies.
Due to Bitcoin's prominent increase in value over the years many investors have deemed it a strong store of value. This paired with its constant availability and high liquidity makes it an excellent long term investment, known in the industry as "hodling".
What Is Bitcoin Used For?
With the seamless functionality of cash, its "always open" usability and the fact that it can be transferred anywhere in the world in a matter of minutes, Bitcoin is an excellent medium of exchange.
Anyone can use Bitcoin as payment for goods and services - many merchants around the world accept the cryptocurrency - or as a store of value. As long as the person has an internet connection, they can send and receive Bitcoin.
Where Did Bitcoin Come From?
First announced to the world on 31 October 2008, Bitcoin was officially launched in early January 2009. The creator, who remains anonymous to this day, goes by the name of Satoshi Nakamoto and is the pioneer behind the crypto revolution.
They stated in the project's whitepaper that Bitcoin was created as a response to the global financial crisis. Instead, they wanted to create a currency that was free from government and banks' control, allowing people to take ownership of their funds and be solely responsible for them.
Somewhere in 2010, Satoshi Nakamoto disappeared and no one has managed to track down their identity since. Many speculate that it was a group of people and not one acting alone.
Since the advent of Bitcoin, a number of new cryptocurrencies have been created. Any new currency that launched was referred to as an altcoin (alternative coin), and this term has stuck. There are over 12,000 cryptocurrencies today, each with its own unique use case. For example, Ethereum was created so that developers could build decentralized applications, while cryptocurrencies like Litecoin were created to improve on Bitcoin's payment system.
How To Invest In Bitcoin
Buying Bitcoin is a lot more straightforward than most people imagine. Simply create an account on the Tap app, verify your identity through the on-screen steps and you'll be able to purchase BTC in no time. Get started here. Learn how to purchase Bitcoin here
What is Bitcoin mining and how does it work? Unpacking the process of generating new Bitcoins and maintaining the security of the blockchain.
When it comes to understanding Bitcoin, an important aspect to get familiar with is the mining of it. As we explore what is Bitcoin mining and how does it work, we aim to empower you with a greater understanding of how the network functions as well as how blockchain technology facilitates the operations on the backend. Adaptable to many industries outside of the cryptocurrency space, blockchain technology is at the forefront of the tech revolution. Understanding how Bitcoin mining works is the first step to understanding the technology too.
What does Bitcoin mining entail?
Forget about shovels and dark tunnels, Bitcoin mining is the decentralized manner in which transactions are verified and new coins are minted. Mining also plays a vital role in the maintenance and operation of the network, ensuring both the security and integrity of the platform at all times. The actual process of Bitcoin mining involves miners using sophisticated computers to solve complex cryptography problems.
The Bitcoin network is made up of a number of nodes (computers) and miners around the world that communicate with each other and constantly share the updated record of the blockchain. The blockchain stores all transactions in a transparent and immutable manner, allowing anyone to view it from wherever they are, however, no one can make any changes.
How does Bitcoin mining work?
Let’s say someone in Japan wants to send money to someone in America through the Bitcoin network. The user in Japan would initiate a transaction from their chosen wallet, pay a network fee, and execute the transaction. This transaction would then enter a mempool, a pool of transactions that are waiting to be confirmed. Typically mempools work on a “first come first serve” basis, however, users can opt to pay a higher network fee should they want to push their transaction further forward in the que.
Miners will then pick up a number of transactions in the mempool and attempt to solve the complex cryptographic puzzle that will lead them to mining the block. The first miner to solve the puzzle is rewarded with the task of verifying the transactions and adding them to a block, in turn receiving the network fees as well as the block reward. Each block on the Bitcoin network can hold 1MB of transactional data.
While many miners will attempt to solve the math problem using their own resources, only one miner will be successful. This has sparked a conversation, largely fueled by Elon Musk’s recent tweet, over the electricity consumption it takes to mine Bitcoin. Tesla, the company that Musk heads, recently withdrew Bitcoin from their payment options due to the un-eco friendly manner in which the network operates, as it goes against their company ethos.
Once the miner has verified the transactions, ensuring that the wallet addresses exist and that there are available coins in the senders’ account, all the transactions are added to a block. This block is then added to the blockchain after the most recently added block, each block indicating the hash code of that block and the block before. This ensures that no one can tamper with the order or edit the content of any blocks.
The user in America will then receive a notification confirming that their wallet has received the BTC, however it will need to go through three confirmations (sometimes more) before being accessible. Each confirmation is represented by a new block added to the blockchain following the block with your transaction.
What is a block reward?
The block reward is a monetary reward given in Bitcoin to the miners for adding a new block to the blockchain. It is also the process used to mint new coins and in the process enter them into circulation. Alongside the block rewards, the miner responsible for adding the new block to the blockchain will also receive the network fees of each transaction verified within that block.
This makes Bitcoin mining a lucrative endeavour, however, the start up costs are significant and your success rate will depend on the equipment, power, and cost of electricity in your area.
What is the halving mechanism?
As Bitcoin will only ever have 21 million coins released, Satoshi Nakamoto created a mechanism that ensures the slow release of coins over time. This is called the halving mechanism, and it automatically executes every 210,000 blocks. During the halving the block reward is halved, ensuring that the cryptocurrency remains deflationary in nature.
This means that for every 210,000 blocks added to the blockchain, the block reward given to the miners will halve. To date there have been three halvings in Bitcoin’s history, with the last one taking effect in May 2020. The block reward is currently 6.25 BTC for every block added to the blockchain.
Want to enjoy the benefits of Bitcoin without mining?
There’s another way to get in on the Bitcoin action without the use of sophisticated hardware and high electricity consumption. Users can tap into the Bitcoin network by buying BTC directly from their phones through the Tap Global app. The process is simple, takes minutes, and allows you to own your very own BTC. Through the Tap app users can also trade, store and spend their cryptocurrency, with advanced technology facilitating the process on the backend to ensure smooth and secure trading.