Crypto-Currency: How to generate free money using your computer

Have you heard of Bitcoin? Doge Coins? Hobo Nickels, perhaps? Believe it or not, these are all legitimate forms of currency that can be used to make online purchases, just as you would with a credit card using real money. Better yet, you can create these "coins" on your own computer for a slow, steady source of income!

So how does it work? All of these strange-sounding coins are forms of Crypto-Currency. Crypto-currency is a somewhat new phenomenon that started out just a few years ago in 2009. A developer going by the pseudonym  Satoshi Nakamoto developed an open-source piece of software called Bitcoin. There have been many different forms of crypto-coins since then, but they all follow the same basic design pattern, which is a bit difficult to wrap one's head around at first.

A cafe in the Netherlands which accepts Bitcoins as payment.

"Honey, I left my laptop in my other coat pocket! Can you get the tab?"

To be perfectly honest, I don't understand the process 100% myself, so please take my explanation with a grain of salt.

Let's take the example of Bitcoin. The distributor of bitcoins releases packets online called "shares of work." Shares of work can be thought of as extremely difficult math problems that take a very long time to solve. To solve these problems, people must install programs onto their computers called "miners." Miners use the graphics card in one's computer to quickly generate hashing algorithms in an attempt to solve these difficult math problems. More often than not (think 99.9999999% of the time or more), these shares of work turn out to be absolutely useless once solved. However, a very small percent of the time, a share of work will contain a block of 25 bitcoins. The value of bitcoins fluctuates constantly, but at the time of this writing, a single bitcoin is worth about $600!

Unfortunately, the odds of actually finding a $15,000 bitcoin block are about the same as winning the lottery (and much less profitable!). To counteract this difficulty, people will usually pool their mining resources, which means that thousands of people all mine at the same time and agree to share profits equally. For example, when one person hits the jackpot and finds a $15,000 block, he splits the money evenly with his 15,000 friends and they each get a dollar apiece. If twenty of these 15,000 people find a block in a day, each person in the pool earns $20 a day just to let their computers run! At least, that's the idea.

The seven dwarfs, off to join a communal crypto-coin mining pool.

This begs the obvious question, though - Why are these virtual coins actually worth money?! The answer may surprise you; crypto-coins are worth money because people say they are! You see, crypto-coins, just like the US Dollar or any other form of major currency, are considered fiat currency. Fiat currency is an object that is virtually worthless on its own, but is assigned intrinsic value simply because people need to have a stable form of currency. Just look at the dollar. It's made out of paper, one of the most common materials on the planet. By all accounts, it shouldn't be worth anything. It only has value because people want it to have value, and because it is very difficult to counterfeit. It can only be obtained by doing work, which gives it value. In this sense, crypto-coins are the exact same. The only difference is that you can hold a dollar in your hands!

This is worth money. This is ACTUALLY worth money.

So there you have it! Like it or not, crypto-coins are a real thing that technically-savvy people are starting to take notice of. Perhaps in just a few years' time, we may see more and more stores accepting crypto-coins alongside the US dollar! Only time will tell.