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 exactly how does it work? Within this guide, I will answer the questions you have about cryptocurrencies. I’m planning to tell you when it was invented, the way it works and why it’s going to be essential in the future. 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 almost no time to waste. Let’s get started! Once I hear a brand new word, I check out its definition within my dictionary. Cryptocurrency is a new word for many people so let’s write a crypto definition.
Mining – Miners try to solve mathematical puzzles first to put the following block on the blockchain and claim a reward.
Exchange – An exchange is really a business (often a website) where you can buy, sell or trade cryptocurrencies.
Wallets – Cryptocurrency wallets are software packages that store public and private keys and enable users to deliver and receive digital currency and monitor their balance.
Crypto Definition – Below is a listing of six things that every cryptocurrency should be to ensure it to be known as a cryptocurrency;
Digital: Cryptocurrency only exists on computers. You will find no coins with no notes. There are no reserves for crypto in Fort Knox or even the Bank of England!
Decentralized: Cryptocurrencies don’t possess a central computer or server. They may be distributed across a network of (typically) 1000s of computers. Networks without a central server are classified as decentralized networks.
Peer-to-Peer: Cryptocurrencies are passed for every person online. Users don’t deal with each other through banks, PayPal or Facebook. They deal with one another directly. Banks, PayPal and Facebook are common trusted third parties. There are no trusted third parties in cryptocurrency! Note: These are called trusted third parties because users have to believe in them with their personal data to use their services. For instance, we trust the lender with our money and that we trust Facebook with our holiday photos!
Pseudonymous: Because of this you don’t have to give any personal data to possess and use 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 need to trust the system because of it to work. Users will be in complete charge of their cash and knowledge 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 almost impossible to hack. It’s also where crypto portion of the crypto definition comes from. Crypto means hidden. When information is hidden with cryptography, it really is encrypted.
Global: Countries have their own currencies called fiat currencies. Sending fiat currencies all over the world is difficult. Cryptocurrencies could be sent around the globe easily. Cryptocurrencies are currencies without borders!
This crypto definition is an excellent start but you’re still a long way from understanding cryptocurrency. Next, I would like 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 – During the early 1990s, many people were struggling to know the net. However, there was some very clever folks who had already realized what a powerful tool it really is. A few of these clever folks, called cypherpunks, considered that governments and corporations had a lot of power over our everyday life. They desired to use the web to provide the individuals of the world more freely. Using cryptography, cypherpunks desired to allow users from the internet to get more control over their funds and data. As you can tell, the cypherpunks didn’t like trusted third parties whatsoever!
At 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 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 would need to wait until 2009 before fmlxdu first fully decentralized digital cash system was created. Its creator had seen the failure in the cypherpunks and considered that they can do better. Their name was Satoshi Nakamoto as well as their creation was called Bitcoin.
Bitcoin became very popular amongst users who saw how important it could 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 price of one particular Bitcoin is 7,576.24 US Dollars. That is still a pretty good return, right? In 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 cover satisfying hunger pangs.