The short and easy answer to the title question is that cryptocurrency is decentralized digital money. But what exactly does that mean and just how does it work? In this particular guide, I will answer all the questions you have about cryptocurrencies. I’m planning to let you know when it was invented, how it operates and why it’s going to be very important down the road. In 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! When I hear a new word, I check out its definition in my dictionary. Cryptocurrency is actually a new word for most people so let’s write a crypto definition.
Mining – Miners attempt to solve mathematical puzzles first to place the next block on the blockchain and claim a reward.
Exchange – An exchange is actually a business (often 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 listing of six things that every cryptocurrency must be in order for that it is known as a cryptocurrency;
Digital: Cryptocurrency only exists on computers. You can find no coins without any notes. There are no reserves for crypto in Fort Knox or even the Bank of England!
Decentralized: Cryptocurrencies don’t have a central computer or server. These are distributed across a network of (typically) thousands 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 with one another directly. Banks, PayPal and Facebook are all trusted third parties. You can find no trusted third parties in cryptocurrency! Note: These are called trusted third parties because users must trust them with their personal information in order to use their services. For example, we trust the bank with our money so we trust Facebook with the holiday photos!
Pseudonymous: Which means that you don’t must give any personal data to obtain and make use of cryptocurrency. You will find no rules about that can own or use cryptocurrencies. It’s like posting on a website like 4chan.
Trustless: No trusted third parties signifies that users don’t need to trust the device for this to function. Users will be in complete control of their funds and data constantly.
Encrypted: Each user has special codes that stop their information from being accessed by other users. This is called cryptography and it’s extremely difficult to hack. It’s also in which the crypto portion of the crypto definition comes from. Crypto means hidden. When information and facts are hidden with cryptography, it is encrypted.
Global: Countries have their own own currencies called fiat currencies. Sending fiat currencies around the world is difficult. Cryptocurrencies may be sent around the globe easily. Cryptocurrencies are currencies without borders!
This crypto definition is a good start but you’re still a long way from understanding cryptocurrency. Next, I would like to inform you when cryptocurrency was created and why. I’ll also answer the question ‘what is cryptocurrency seeking to achieve?’
The Origin of Cryptocurrency – In the early 1990s, a lot of people were struggling to comprehend the internet. However, there were some very clever folks who had already realized just what a powerful tool it is. Some of these clever folks, called cypherpunks, considered that governments and corporations had a lot of power over our way of life. They wished to use the internet to offer the people of the world more freely. Using cryptography, cypherpunks wanted to allow users from the internet to get additional control over their money and information. As you can tell, the cypherpunks didn’t like trusted third parties whatsoever!
Near the top of the cypherpunks, the to-do list was digital cash. DigiCash and Cybercash were both attempts to produce a digital money system. Both had some of the six things should be cryptocurrencies but neither had every one of them. In the end of 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 developed. Its creator had seen the failure in the cypherpunks and considered that they might do better. Their name was Satoshi Nakamoto as well as 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 more than twenty thousand US Dollars! Today, the price of one particular Bitcoin is 7,576.24 US Dollars. Which is still a very good return, right? In 2010, a programmer bought two pizzas for 10,000 BTC in one of the first real-world bitcoin transactions. Today, ten thousand BTC is equal to roughly $38.1 million – a big price to fund satisfying hunger pangs.