What is cryptocurrency?
Cryptocurrency is actually digital money, the main idea with cryptocurrency is that the system allow users to make secure transactions anonymously.
This system is using strong cryptography as a process to convert information in to an unbreakable code, to securely track transactions.
Back in the 90’s many have tried to create digital money but failed.
Once the Blockchain system was imbedded, many different alt-coins were created.
We all think about Bitcoin when we hear the word cryptocurrency, although Bitcoin got the most media coverage, for it was the first cryptocurrency, making it the most popular cryptocurrency, there are other strong cryptocurrencies, such as; Ethereum, Ripple, Litecoin, Monero etc. that are as strong and secure as Bitcoin and worth learning about.
Bitcoin as the most popular digital coin with an estimated market cap of 169$ billion and it’s occupying 32% in total market share.
In 2008, Satoshi Nakamoto, the inventor of Bitcoin (or one of them, no one knows for sure) announced that he developed a ‘peer-to-peer electronic cash system’.
Satoshi have failed to build a centralized digital cash system, so he tried to build a system without a central entity- just like peer-to-peer file sharing system.
In centralized money we have a third party to check if the funds are available for the transaction,
that third party approve and finalize transactions through a server that keeps track of the transaction history and balance.
In cryptocurrency- decentralized system, this third party server is not needed thanks to the ‘peer- to-peer’ technology; every peer in the system keeps record of all transactions to check if future transactions are valid.
These peers must be in consensus regarding the transaction information to approve the transaction, if in fact just one peer finds a miss match in the transaction data the system will break and the transaction will be canceled.
Really Satoshi’s innovation was to achieve consensus without a central authority and cryptocurrency is a part of this solution.
When sending Bitcoin to another person you simply send a file stating that you are sending X bitcoin to another person, for example; “John gives 2 bitcoin to David” AKA a peer-to-peer transaction.
In that time, this information is sent to all peers and the whole network is updated about this transaction but only after a certain amount of time (few short minutes) the transaction gets confirmed.
Only after confirmation, this transaction is a part of an immutable record of historical transactions of the blockchain.
Every transaction must be approved by a miner and every peer have to update the transaction in their database, in return, miners are rewarded with cryptocurrency tokens.
Through this system there is no one person or organization that can affect the value of cryptocurrency.
That database cannot be affected of changed by people you don’t know or events and rules that are out of your power, unlike the money we hold with the bank.
Cryptocurrencies are built on cryptography; they are secured by a mathematical system and not by people or people managing organizations.
Through this method it would be more likely you will get struck by lightning then that a bitcoin address will be compromised.
There is no ‘Charge-back’s’, no safety net.
While the transaction is pending for confirmation the cryptocurrency is exposed to hackers, and if a hacker manage to hack your computer and steal cryptocurrency even Satoshi himself can’t help you recover back your money.
Fast and global
It makes no difference if you’re sending bitcoin to your next door neighbor
or to a friend from the other side of the world, as long as both parties have internet connection the receiving side will be able to get his bitcoin within minutes.
To send cryptocurrency, every owner have a privet key and thanks to strong cryptography a bitcoin address is more secure than Fort NOx.
No one, person or authority, can prevent you from using cryptocurrency.
No one can cancel or disapprove your transaction.
Anybody can download this free software (wallet) and start sending and receiving bitcoins, if the peers and miner confirm the transaction it’s a done deal.
That’s why future cryptocurrency value can be roughly calculated today, there are no surprises.
Cryptocurrency represent themselves, not a government debt.
As well you can’t hinder anyone to use bitcoin, neither can’t you prohibit anyone to accept a payment and of course no one can undo a transaction. Cryptocurrency takes away the control central banks take on inflation or deflation by manipulating the monetary supply.
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