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, how it works and why it’s going to be so important later on. By 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 begin! When I hear a new word, I look up its definition in my dictionary. Cryptocurrency is actually a new word for many people so let’s write a crypto definition.
Mining – Miners try to solve mathematical puzzles first to place the following 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 and receive digital currency and monitor their balance.
Crypto Definition – Below is a listing of six things that every cryptocurrency must be to ensure so that it is called a cryptocurrency;
Digital: Cryptocurrency only exists on computers. You will find no coins with 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. These are distributed across a network of (typically) thousands of computers. Networks with no central server are known as decentralized networks.
Peer-to-Peer: Cryptocurrencies are passed individually for each person online. Users don’t deal together through banks, PayPal or Facebook. They deal with one another directly. Banks, PayPal and Facebook are all trusted third parties. There are no trusted third parties in cryptocurrency! Note: They may be called trusted third parties because users must believe in them making use of their personal information in order to use their services. As an example, we trust the lender with the money and that we trust Facebook with our holiday photos!
Pseudonymous: This means that you don’t have to give any personal information to own and utilize 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 program for this to function. Users will be in complete control of their funds and information all the time.
Encrypted: Each user has special codes that stop their information from being accessed by other users. This is known as cryptography and it’s nearly impossible to hack. It’s also where the crypto area of the crypto definition arises from. Crypto means hidden. When information is hidden with cryptography, it is actually encrypted.
Global: Countries have their own currencies called fiat currencies. Sending fiat currencies around the globe is hard. Cryptocurrencies can be sent worldwide easily. Cryptocurrencies are currencies without borders!
This crypto definition is a good start but you’re still quite a distance 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 – During the early 1990s, most people were still struggling to understand the net. However, there was some very clever people that had already realized exactly what a powerful tool it is actually. A few of these clever folks, called cypherpunks, considered that governments and corporations had excessive power over our lives. They desired to use the web to give the individuals around the world more freely. Using cryptography, cypherpunks wanted to allow users in the internet to get more control over their cash and information. As possible 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 create a digital money system. They both had a number of the six things should be cryptocurrencies but neither had all of them. By the end in the the nineties, both had failed. Satashi Nakamoto creator of bitcoinThe world would have to delay until 2009 before fmlxdu first fully decentralized digital cash system was developed. Its creator had seen the failure from the cypherpunks and believed that they could do better. Their name was Satoshi Nakamoto and their creation was called Bitcoin.
Bitcoin became more popular amongst users who saw how important it might 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 buying price of just one Bitcoin is 7,576.24 US Dollars. That is still an excellent return, right? In 2010, a programmer bought two pizzas for ten thousand BTC within the first real-world bitcoin transactions. Today, ten thousand BTC is the same as roughly $38.1 million – a big price to fund satisfying hunger pangs.