WHAT IS CRYPTOCURRENCY?
A cryptocurrency is a digital currency in which sophisticated encryption is used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.
Cryptocurrencies are decentralized, rather than centralized, meaning that transactions are verified by a network of users. Any user can join the network to contribute to the verification process and is rewarded with currency for doing so, colloquially known as “mining." Verified transactions are published to a distributed ledger called a blockchain.
WHAT IS A BLOCKCHAIN?
A blockchain is a distributed database used to maintain a continuously growing list of records, called blocks. A blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks.
By design, blockchains are inherently resistant to data modification. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network.
This makes blockchains suitable for the recording of events, medical records, and other records management activities, identity management, transaction processing, and documenting provenance.
WHAT IS BITCOIN?
Bitcoin is a cryptocurrency and digital payment system invented in 2009 by Satoshi Nakamoto, a pseudonym for an unknown individual or group of individuals.
To date, Bitcoin is the most successful and widely adopted cryptocurrency, accepted by over 100k merchants and vendors.
WHAT IS ETHEREUM?
Ethereum is a cryptocurrency proposed in late 2013 and launched in July 2015 by Vitalik Buterin et al.
Several features make Ethereum a much more robust currency than say, Bitcoin. The inclusion of a Turing Complete programming language allows for the creation of automatically executing contracts, known as “smart contracts."
Ethereum is also a great platform that allows for the creation of custom tokens, a feature that powers most initial coin offerings.
WHAT IS MINING?
Mining is the name given to the process of verifying transactions on a blockchain. New transactions are broadcast to miners who run mining software on their computers. Miners race to solve a cryptographically difficult problem and the first to solve the problem is rewarded with currency. This incentivizes people to participate in the network.
WHAT IS A WALLET?
A wallet is a digital holding account, somewhat akin to a checking account. For instance, Coinbase (a popular online exchange) offers hosted Bitcoin and Ethereum wallets for storing your currencies. Each wallet has a unique address, used for sending and receiving money. There are also non-hosted wallets, usually available in the form of a downloadable app or private key.
One key difference between a wallet and a checking account is that your checking account is likely FDIC insured by the bank that provides the account. Cryptocurrency wallets, hosted or not-hosted, are generally not insured by any entity, If you lose your wallet (private key, phone, laptop computer, etc.), your money is gone forever.
WHAT IS AN INITIAL COIN OFFERING?
An initial coin offering, or ICO, is a method of crowdfunding. ICO’s exist in a legal grey area and, depending on the opinion of your legal team, can be structured several different ways.
In general, an ICO is the issuance of a custom token to a community for investing purposes. Enthusiasts and supporters of the company purchase the token in hopes that they’ll earn a return on their investment. In return, the company issuing the token gets access to immediate and liquid capital.
No equity is exchanged during an ICO however in many cases the custom tokens can be redeemed for utility on the network sometime in the future -- compute cycles, storage space, or some other form of credit.
The presence of “utility” can change the legal nature of a custom token. If a token has utility, it likely can’t be classified as a security. However, if a token lacks any sort of utility -- like being sold prior to the launch of a product -- the sale looks like an investment and would likely be classified security, falling under SEC regulation.
ICO’s are considered highly risky investments.
WHAT IS A SMART CONTRACT?
A smart contract is an automatically executing contract defined programmatically on the blockchain.
Industries that deal with records management are all ripe for innovation using blockchain technologies. Recording of events, medical records, identity management, transaction processing, documenting provenance, and more.
It’s conceivable someday that health records could be managed on a blockchain and encrypted on your smart phone. A trip to the clinic would have you granting temporary permissions for your doctor to add notes, tests, and test results to your file. Because your insurance information is encoded in your health record, your doctor could write a prescription and process payment before you ever leave the office. Because you “own” your data, if you opted to visit a different clinic, you would simply provide your health record to your new doctor. This would cut down on billing department personnel at clinics/hospitals and greatly simplify health record management as data would no longer be stored onsite.