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? In this particular guide, I will answer all the questions you have about cryptocurrencies. I’m planning to inform you when it was invented, the way it works and why it’s going to be very 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 world of cryptocurrency moves fast so there’s virtually no time to waste. Let’s get going! When I hear a brand new word, I check out its definition inside my dictionary. Cryptocurrency is really a new word for most people so let’s write a crypto definition.
Mining – Miners make an effort to solve mathematical puzzles first to place the following block on the blockchain and claim a reward.
Exchange – An exchange is a business (normally 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 deliver 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 so that it is referred to as a cryptocurrency;
Digital: Cryptocurrency only exists on computers. You can find no coins and no notes. You can find no reserves for crypto in Fort Knox or even the Bank of England!
Decentralized: Cryptocurrencies don’t use a central computer or server. They may be distributed across a network of (typically) a large number of computers. Networks without having a central server are classified as decentralized networks.
Peer-to-Peer: Cryptocurrencies are passed from person to person online. Users don’t deal together through banks, PayPal or Facebook. They deal with each other directly. Banks, PayPal and Facebook are common trusted third parties. You will find no trusted third parties in cryptocurrency! Note: These are called trusted third parties because users have to have confidence in them making use of their private information in order to use their services. For example, we trust the lender with our money so we trust Facebook with this holiday photos!
Pseudonymous: Which means that you don’t must give any private information to possess and make use of 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 program because of it to function. Users are in complete charge of their money and information 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 part of the crypto definition arises from. Crypto means hidden. When details are hidden with cryptography, it really is encrypted.
Global: Countries get their own currencies called fiat currencies. Sending fiat currencies around the globe 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 quite a distance from understanding cryptocurrency. Next, I want to let you know when cryptocurrency was made 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 still struggling to understand the internet. However, there were some very clever folks who had already realized exactly what a powerful tool it is actually. Some of these clever folks, called cypherpunks, considered that governments and corporations had excessive control of our way of life. They wished to use the internet to provide the people around the globe more freely. Using cryptography, cypherpunks wanted to allow users in the internet to possess more control over their money and knowledge. 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 some of the six things must be cryptocurrencies but neither had every one of them. At the end in the the nineties, both had failed. Satashi Nakamoto creator of bitcoinThe world will have to hold off until 2009 before fmlxdu first fully decentralized digital cash system was created. Its creator had seen the failure of the cypherpunks and thought that they could do better. Their name was Satoshi Nakamoto and their creation was called Bitcoin.
Bitcoin became 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 a single Bitcoin is 7,576.24 US Dollars. Which is still a pretty good return, right? During 2010, a programmer bought two pizzas for 10,000 BTC in one of the first real-world bitcoin transactions. Today, 10,000 BTC is equivalent to roughly $38.1 million – a big price to fund satisfying hunger pangs.