The short and 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 guide, I will answer all the questions you have about cryptocurrencies. I’m planning to inform you when it was invented, how it operates and why it’s going to be very important down the road. 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 get going! After I hear a new word, I look up its definition within my dictionary. Cryptocurrency is really a new word for most people so let’s write a crypto definition.
Mining – Miners try to solve mathematical puzzles first to set another block on the blockchain and claim a reward.
Exchange – An exchange is a business (usually 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 which every cryptocurrency has to be to ensure that that it is referred to as a cryptocurrency;
Digital: Cryptocurrency only exists on computers. You will find no coins without any notes. You will find no reserves for crypto in Fort Knox or even the Bank of England!
Decentralized: Cryptocurrencies don’t have a central computer or server. They are distributed across a network of (typically) thousands of computers. Networks without having a central server are known 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 one another directly. Banks, PayPal and Facebook are trusted third parties. There are no trusted third parties in cryptocurrency! Note: They are called trusted third parties because users have to believe in them using their personal data in order to use their services. For instance, we trust the lender with our money and that we trust Facebook with our holiday photos!
Pseudonymous: Which means that you don’t must give any personal information to own and use cryptocurrency. You can find no rules about who are able to own or use cryptocurrencies. It’s like posting on a website like 4chan.
Trustless: No trusted third parties means that users don’t have to trust the device for it to operate. Users have been in complete control over their cash and data 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 extremely difficult to hack. It’s also where the crypto portion of the crypto definition comes from. Crypto means hidden. When details are hidden with cryptography, it really is encrypted.
Global: Countries have their own own currencies called fiat currencies. Sending fiat currencies around the world is difficult. Cryptocurrencies could be sent worldwide 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 wish to let you know when cryptocurrency was created and why. I’ll also answer the question ‘what is cryptocurrency seeking to achieve?’
The Origin of Cryptocurrency – In early 1990s, most people were still struggling to know the net. However, there have been some very clever folks who had already realized exactly what a powerful tool it is. Many of these clever folks, called cypherpunks, believed that governments and corporations had too much control of our lives. They wanted to search on the internet to provide the individuals of the world more freely. Using cryptography, cypherpunks wanted to allow users in the internet to have additional control over their cash and data. That 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. Both had a few of the six things must be cryptocurrencies but neither had every one of them. At the end from the the nineties, both had failed. Satashi Nakamoto creator of bitcoinThe world would have to wait until 2009 before fmlxdu first fully decentralized digital cash system was made. Its creator had seen the failure in the cypherpunks and thought that they might do better. Their name was Satoshi Nakamoto and their creation was called Bitcoin.
Bitcoin became more 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 a lot more than twenty thousand US Dollars! Today, the cost of just one 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 at one of the first real-world bitcoin transactions. Today, ten thousand BTC is the same as roughly $38.1 million – a huge price to cover satisfying hunger pangs.