The short and simple answer to the title question is that cryptocurrency is decentralized digital money. But what exactly does that mean and exactly how does it work? In this particular guide, I will answer the questions you have about cryptocurrencies. I’m going to tell you when it was invented, how it works and why it’s going to be very important later on. At the end of this guide, you’ll be able to answer the question, “what is a cryptocurrency?” for yourself.
The realm of cryptocurrency moves fast so there’s virtually no time to waste. Let’s begin! Once I hear a new word, I search for its definition within my dictionary. Cryptocurrency is actually a new word for most of us so let’s write a crypto definition.
Mining – Miners attempt to solve mathematical puzzles first to place another block on the blockchain and claim a reward.
Exchange – An exchange is actually a business (usually a website) where you could buy, sell or trade cryptocurrencies.
Wallets – Cryptocurrency wallets are software packages that store public and private keys and enable users to send out and receive digital currency and monitor their balance.
Crypto Definition – Below is a listing of six stuff that every cryptocurrency should be in order for it to be known as a cryptocurrency;
Digital: Cryptocurrency only exists on computers. You can find no coins without any notes. You will find no reserves for crypto in Fort Knox or the Bank of England!
Decentralized: Cryptocurrencies don’t use a central computer or server. They are distributed across a network of (typically) 1000s of computers. Networks without a central server are known as decentralized networks.
Peer-to-Peer: Cryptocurrencies are passed from person to person online. Users don’t deal with each other through banks, PayPal or Facebook. They deal together directly. Banks, PayPal and Facebook are all trusted third parties. You can find no trusted third parties in cryptocurrency! Note: They are called trusted third parties because users have to have confidence in them making use of their personal information to use their services. For instance, we trust the financial institution with this money and we trust Facebook with this holiday photos!
Pseudonymous: Because of this you don’t must give any personal data to obtain and utilize cryptocurrency. There are no rules about that can own or use cryptocurrencies. It’s like posting online like 4chan.
Trustless: No trusted third parties signifies that users don’t must trust the device because of it to operate. Users have been in complete control over their cash and data at all times.
Encrypted: Each user has special codes that stop their information from being accessed by other users. This is known as cryptography and it’s extremely difficult to hack. It’s also in which the crypto part of the crypto definition originates from. Crypto means hidden. When details are hidden with cryptography, it is encrypted.
Global: Countries have their own currencies called fiat currencies. Sending fiat currencies around the world is tough. Cryptocurrencies could be sent all over the world easily. Cryptocurrencies are currencies without borders!
This crypto definition is a great start but you’re still quite a distance from understanding cryptocurrency. Next, I want to inform you when cryptocurrency was developed and why. I’ll also answer the question ‘what is cryptocurrency seeking to achieve?’
The Origin of Cryptocurrency – In the early 1990s, many people were struggling to understand the net. However, there have been some very clever people that had already realized exactly what a powerful tool it is. Some of these clever folks, called cypherpunks, believed that governments and corporations had too much control of our lives. They desired to use the web to provide the folks of the world more freely. Using cryptography, cypherpunks desired to allow users from the internet to possess more control over their funds and data. As possible tell, the cypherpunks didn’t like trusted third parties in any way!
Near the top of the cypherpunks, the to-do list was digital cash. DigiCash and Cybercash were both attempts to make a digital money system. Both had a number of the six things needed to be cryptocurrencies but neither had them all. At the end of the the nineties, both had failed. Satashi Nakamoto creator of bitcoinThe world will have to wait until 2009 before fmlxdu first fully decentralized digital cash system was made. Its creator had seen the failure of the cypherpunks and thought that they can do better. Their name was Satoshi Nakamoto along with their creation was called Bitcoin.
Bitcoin became very popular amongst users who saw how important it may become. In April 2011, one Bitcoin was worth one US Dollar (USD). By December 2017, one Bitcoin was worth greater than twenty thousand US Dollars! Today, the cost of one particular Bitcoin is 7,576.24 US Dollars. That is still an excellent return, right? During 2010, a programmer bought two pizzas for 10,000 BTC within the first real-world bitcoin transactions. Today, ten thousand BTC is equivalent to roughly $38.1 million – a big price to fund satisfying hunger pangs.