The short as well as simple answer to the title question is that cryptocurrency is decentralized digital money. But what exactly does that mean and just how does it work? Within this guide, I will answer all the questions you have about cryptocurrencies. I’m planning to tell you when it was invented, how it works and why it’s going to be so important in the future. At the end of this guide, you’ll be able to answer the question, “what is a cryptocurrency?” for yourself.
The industry of cryptocurrency moves fast so there’s no time to waste. Let’s get going! Once I hear a brand new word, I look up its definition inside my dictionary. Cryptocurrency is a new word for most of us so let’s write a crypto definition.
Mining – Miners attempt to solve mathematical puzzles first to set the following block on the blockchain and claim a reward.
Exchange – An exchange is actually a business (normally a website) where you could buy, sell or trade cryptocurrencies.
Wallets – Cryptocurrency wallets are software programs 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 summary of six stuff that every cryptocurrency has to be in order for it to be called a cryptocurrency;
Digital: Cryptocurrency only exists on computers. You will find no coins and no notes. You can find no reserves for crypto in Fort Knox or perhaps the Bank of England!
Decentralized: Cryptocurrencies don’t possess a central computer or server. They are distributed across a network of (typically) a large number of computers. Networks with no central server are classified as decentralized networks.
Peer-to-Peer: Cryptocurrencies are passed from person to person online. Users don’t deal with one another through banks, PayPal or Facebook. They deal with one another directly. Banks, PayPal and Facebook are trusted third parties. You will find no trusted third parties in cryptocurrency! Note: They are called trusted third parties because users must believe in them using their private information in order to use their services. For example, we trust the lender with the money so we trust Facebook with the holiday photos!
Pseudonymous: Because of this you don’t must give any private information to obtain and utilize cryptocurrency. You will find no rules about who are able to own or use cryptocurrencies. It’s like posting online like 4chan.
Trustless: No trusted third parties means that users don’t have to trust the system for this to work. Users are in complete control of their money and knowledge constantly.
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 where crypto portion of the crypto definition comes from. Crypto means hidden. When details are hidden with cryptography, it is encrypted.
Global: Countries have their own own currencies called fiat currencies. Sending fiat currencies all over the world is difficult. Cryptocurrencies can be sent all over the world easily. Cryptocurrencies are currencies without borders!
This crypto definition is a good start but you’re still a considerable ways from understanding cryptocurrency. Next, I wish to tell you when cryptocurrency was developed and why. I’ll also answer the question ‘what is cryptocurrency seeking to achieve?’
The Foundation of Cryptocurrency – In early 1990s, a lot of people were still struggling to understand the internet. However, there have been some very clever folks who had already realized what a powerful tool it really is. Many of these clever folks, called cypherpunks, considered that governments and corporations had excessive control of our way of life. They wanted to search on the internet to give the folks around the globe more freely. Using cryptography, cypherpunks wished to allow users of the internet to possess more control over their money and knowledge. As you can tell, the cypherpunks didn’t like trusted third parties at all!
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. They both had a few of the six things must be cryptocurrencies but neither had them all. At the end in the the nineties, both had failed. Satashi Nakamoto creator of bitcoinThe world will have to delay until 2009 before fmlxdu first fully decentralized digital cash system was created. Its creator had seen the failure of the cypherpunks and believed that they could do better. Their name was Satoshi Nakamoto along with their creation was called Bitcoin.
Bitcoin became 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 a lot more than twenty thousand US Dollars! Today, the price of a single Bitcoin is 7,576.24 US Dollars. That is still a very good return, right? During 2010, a programmer bought two pizzas for 10,000 BTC at one of the first real-world bitcoin transactions. Today, 10,000 BTC is equivalent to roughly $38.1 million – a large price to fund satisfying hunger pangs.