Connect with us

Business Finance

How cryptocurrency works – basic vocabulary and concepts

(FINANCE) Cryptocurrency is a concept that dates back a decade, but as it becomes newly mainstream, many are struggling to catch up – knowing the basic concepts can get you up to speed.

Published

on

cryptocurrency

One of the most exciting things to arise out of new technology is the idea of better ways to optimize and improve concepts that we already find in the real world. None of us should be surprised when that includes currency.

With cryptocurrencies such as Bitcoin, Ethereum, Ripple, Litecoin, Dash, NEM, Ethereum Classic, Monero, and Zcash (to name a few), it may be hard for the average consumer not to just keep up, but to know what’s going on in this revolution in our modern day economy. Knowing how crypto works makes you a better consumer, as well as investor in your future. Let’s get started with the basics.

What is a cryptocurrency?

To ask what cryptocurrency is, one should also contemplate what modern day paper or coin currency is. At its most basic, all currencies share this core trait: you can exchange a unit (or units) which has predetermined value for either goods or services. Whether it’s dollars, Yen, the gold standard, or Dogecoin, all of these currencies allow you to complete basic transactions.

Where cryptocurrency is different, is how these transactions are completed and how cryptocurrencies are processed.

How does crypto differ from common currencies?

Cryptocurrency allows you to send money directly peer-to-peer (p2p) electronically instead of operating through third-party systems like banks or governments.

The technology that makes this happen is called Blockchain. Blockchain technology is the primary difference between the dollars in your wallet and the virtual currencies in your crypto wallet. The Litecoin School of Crypto uses a great analogy to explain how blockchains work:

“In its simplest form, blockchain is data. It’s a list of recorded information called “blocks” strung together in a chain. Think of blocks as folders stuffed with information i.e. how much Litecoin was sent, who sent it, and who received it. The great thing about blockchains is that it’s public and anyone in the world can see it.”

How does a normal crypto transaction work?

Here’s an example using the fictional cryptocurrency, bitquarters: Karen owes Jamal 10 bitquarters for her movie ticket, so she’s going to pay him back. Karen first requests the transaction through her digital wallet. Because of the nature of cryptocurrency, she can’t send him bitquarters she doesn’t have (there is no “overdrawn” account status in crypto, like modern banks), so it’s a good thing she just got paid!

When Karen initiates the transaction, she uses her private key to virtually “sign” it. When a transaction is completed, an individual will “sign” their transaction with their private key – the reason why cryptocurrency is called as such is because of encryption, after all. The requested transaction is sent via peer-to-peer (p2p) sharing to a network of computers called nodes. These computers validate Karen’s key and verify the transaction.

After the transaction is verified, it is added to the blockchain, the virtual ledger, that all bitquarter users have access to. After that is finished, in only a matter of seconds, Jamal is paid!

What is this cryptocurrency “mining” thing I’ve been hearing so much about?

Mining is a vital part of the cryptocurrency transaction. Miners are the only individuals in the crypto process that can confirm transactions. Their job is to take a transaction, to verify that it is legitimate, and spread them p2p in the network.

To make it a part of the public ledger (the blockchain) every node has to add it to its database. Because mining takes a computer’s energy and electricity to perform, miners are rewarded with small amounts of cryptocurrency per transaction (like how you pay to pull money from an ATM). However, to prevent fraudulent transactions, a computer must solve an encrypted puzzle in order to add it to the blockchain.

What are other important crypto terms I need to know?

Address: the only piece of information that needs to be used for a transaction, similar to a user name or email address. Each transaction uses a different address.

Block: a unit of data in the blockchain that holds and validates transactions. A blockchain is where all blocks of transactions reside.

Double spend: the action of trying to spend cryptocurrency to two different recipients simultaneously. Mining as well as the blockchain prevent malicious actions such as this from taking place.

Cryptocurrency is held up by some as being the currency of the future, while many others think that due to over-speculation, that it will be a investment bubble with irrevocable consequences for brick and mortar institutions. Regardless of any market forecasters perspective on cryptocurrency, the technology is here to stay and knowing the basic vocabulary can help you understand where things are going.

Don’t be intimidated by all of the language around this concept – if you choose to dive into the crypto waters, you’ll learn as you go along. If you invest in stocks, you know a specific concept and vocabulary list, and crypto functions differently but is just another finance mechanism, both of which can be overwhelming but learning the parts necessary to your goals is all that matters.

PS: If you’re more of a visual person, there’s a short video available that has circulated that explains Bitcoing well, and applies to crypto in general.

This story was first published in February 2018.

Alexandra Bohannon has a Master of Public Administration degree from University of Oklahoma with a concentration in public policy. She is currently based in Oklahoma City, working as a freelance filmmaker, writer, and podcaster. Alexandra loves playing Dungeons and Dragons and is a diehard Trekkie.

Business Finance

How business owners should handle the trend of COVID-19 surcharges

(BUSINESS FINANCE) COVID-19 has caused a lot of money problems, but some places have decided to counter this with new surcharges, and hopefully they told customers about them.

Published

on

COVID-19 surcharges

Hidden surcharges have long been a subject of discussion among consumers. Banks, car dealers, hotels, and credit card companies are much more transparent than they once were. According to a 2019 survey by Consumer Reports, 85% percent of adult consumers were hit by an unexpected fee when paying for a service, so the practice is not completely gone. With COVID-19, some businesses are turning to surcharges to balance out their profit margins.

Can businesses add a COVID surcharge legally?

The impact of COVID-19 is continuing to unravel. FOX8 reports that a Missouri steakhouse and sushi restaurant included a surcharge related to the rising costs of food under the pandemic. A CBS affiliate in Midland, TX reminds consumers to check their bills, because restaurants and salons are adding surcharges. Some businesses are saying that state restrictions are increasing operational costs, while others relate it to the cost of goods. Even UPS has added surcharges to peak delivery slots. According to a librarian at the State Law Library, a private business in Texas has a lot of leeway in deciding what to charge.

A surcharge isn’t necessarily price gouging

In Texas, price gouging following a natural disaster is illegal. The surcharges that we’re discussing aren’t price gouging, just a way for businesses to temporarily raise prices without changing their menu or listing new prices. The Houston BBB recommends that if your business does add a surcharge, it should notify consumers about the charge before the bill arrives. Consumers who believe that they’ve been a victim of price gouging should file a complaint with the Texas Attorney General.

Transparency is part of good customer service

According to Consumer Reports, 96% of the consumers surveyed were annoyed with a hidden fee. I want to talk to the 4%, and find out why they weren’t. A surcharge under COVID-19 conditions can make sense. Cleaning and sanitizing takes time and money. Prices have increased. What’s bad business is trying to hide those surcharges until after the customer checks out. That’s not fair. Be transparent.

Continue Reading

Business Finance

Tool simplifies vender payments, saves small businesses tons of time

(BUSINESS FINANCE) Melio is a B2B payment platform that simplifies bill payment for small businesses while freeing up their cash flow. Quick and easy, even from your phone.

Published

on

Melio homepage

Designed to maximize cash flow and consolidate the complications of paying bills and vendors, the startup Melio could be a big boost for small businesses.

The way this payment workflow tool works is that it lets you pay any vendor –including those who do not accept credit cards- using a bank transfer, or check mailed on your behalf for B2B payments.

Specializing in small business payments, accounts payable, accounts receivable, online payments, and business to business payments; it is free to send and receive payments using bank transfers/ ACH but credit card payments incur a 2.9% fee.

The onboarding is straightforward, including integration and automatic sync with QuickBooks, which is essential for many small businesses. Lots of online customer reviews via Trustpilot and other sites claim that Melio is user friendly with responsive, human customer service. Melio fills the gap between the bill payer who wants to use a credit card to pay a bill, and the biller, who wants to receive their money as simply as possible, and without credit card fees. Many small businesses have to manage the challenge of payments to purveyors such as utilities and landlords that do not accept credit cards, or want to deal with the associated merchant fees.

Melio and bill payment services allow businesses who prefer to use a credit card for payment to do so. For a small business who could really use the float and cash flow of a 21-day billing grace period of a credit card, or using a card with a sweet rewards program, this could be a valuable option.

Melio does not have a mobile app to download, but it is described on the meliopayments.com website as having a mobile-friendly, responsive web app easily-managed across devices. Most of the reviews seem to confirm the user-friendliness of this tool, and the few poor reviews I have seen involved requests from Melio for compliance documents that were not satisfied by businesses, and resulted in undelivered payments. With more than 2 years since its founding, Melio is continuing to grow and cater to the needs of small businesses in the United States who want to streamline their accounts payable process.

Continue Reading

Business Finance

Politicians reconsider PPP rules too cumbersome for small businesses

(BUSINESS FINANCE) The PPP loans may have some changes coming soon, to help small businesses even more by extending the time they have to spend the money.

Published

on

loan changes

Congress has reported talks over fixing parts of the Paycheck Protection Program (PPP), a key program designed to help businesses during the coronavirus pandemic. Changes could range between small tweaks to an overhaul of program requirements. Congress remains divided over a phase four relief bill (passed in the House last week) which includes several of those PPP changes.

The PPP was created to provide forgivable loans to businesses with fewer than 500 employees. Although the Treasury is continuing to offer updated guidance, any significant changes will require approval from Congress.

One of the major potential changes is an extension to the eight-week time frame for businesses to spend their loan money. Senator Marco Rubio (R.-Fla.) is advocating the change. He told reporters “I think the more important thing to change is the time frame in which they can use it for,” Rubio told reporters. “We do need to give them more time to spend those monies.” The hope is to pass those changes before the first PPP loan recipients reach their deadline in early June.

Other changes proposed in the House bill include extending the spending time period to 24-weeks and eliminating the requirement for 75 percent of loan spending on payroll in order to qualify for full forgiveness. The flexibility could allow recipients to allocate money towards rent, another challenge facing small business owners. While Senate Republicans haven’t shot down that option, they’ve voiced concern on the spending rule which was originally designed to keep workers employed. Meanwhile, Democrats argue for flexibility which could support businesses with fixed costs. Both sides are open to discussing a 50 percent payroll and 50 percent additional cost breakdown in a new PPP changes.

The Small Business Administration has reported $195 billion from the $310 billion of the second tranche of PPP has been approved. With no defined plan to reopen the country, small businesses are counting on relief programs. Senior White House advisor Kevin Hassett has said the government can’t continue to lend money to businesses indefinitely. “It is something we can do through Jun, I would, guess if there’s enough cash for that.”

Continue Reading
Advertisement

Our Great Partners

The
American Genius
news neatly in your inbox

Subscribe to our mailing list for news sent straight to your email inbox.

Emerging Stories

Get The American Genius
neatly in your inbox

Subscribe to get business and tech updates, breaking stories, and more!