Everything you need to know about Cryptocurrency

What is cryptocurrency?

The term cyrptocurrency has been creating a lot of buzz in the financial domain with numerous people adopting this technological marvel. Cryptocurrency is digital money that’s created with a revolutionary technology that controls its creation and safeguards the transactions, while keeping the identities of its users anonymous.

Crypto is the short for ‘cryptography’, which is a computer technology, used for safeguarding, hiding or masking information, identities and more. Currency simply means a medium of exchange of value. Cryptocurrencies are digital cash that is designed to be quicker, cheaper and more trustworthy than our fiat currencies. Instead of trusting a government to create money any institution to store, send and receive it, users can directly transact with each other and manage their money all by themselves. As people using cryptocurrency can send or receive money directly without a third party, transactions are usually very affordable and fast.

In the absence of any central authority, in order to safeguard the system from fraud and manipulation, by the virtue of the design, every user of a cryptocurrency can simultaneously record and verify the transactions and the transactions of everyone else. The digital transaction recordings are similar to a ledger and this ledger is publicly available to anyone. This distributed public ledger makes the transactions more efficient, permanent, secure and transparent.

With public records and a robust technological underpinning, cryptocurrencies dismisses our reliance on any bank. Neither do they require you to trust the person you are doing business with to actually pay you. Instead, you can witness the digital money being sent, received, verified, and recorded by thousands of people who are the part of the cryptocurrency network. This system requires no ‘trust’ among parties to sustain as everything is scrutinised by numerous users.’ Trustlessness’ is a key attribute of cryptocurrency and its underlying technology.

cryptocurrency

What is bitcoin?

The first cryptocurrency was bitcoin which was created by a hitherto pseudonymous individual or group named Satoshi Nakamoto and is considered as a technological marvel.

Bitcoin is unique because it does not rely on government. In addition, transactions occur directly between people whose real identities are not revealed. Each transaction is recorded on a digital ledger known as blockchain, maintained by numerous users across the globe. The data on the blockchain is publicly available and stored on many computers for the users to access. Because such numerous copies are being simultaneously maintained, the transaction data is very safe and virtually impossible to manipulate. Individuals hold their cryptos in what is known as digital wallets. Essentially a wallet is software that can only be accessed by using a private key, which comprises of a long string of letters and numbers. Bitcoin’s price has increased manifold times but you can still own bitcoin by purchasing a fraction of it.

bitcoin

What is blockchain?

Blockchain is technology for enabling permanent, secure digital entries that don’t rely on any single person or group. Blockchains can record any information whether monetary or not, though the first functional blockchain was created to record bitcoin transactions.

Blocks are similar to the pages in the book of records that are generated one after the other and are put together in the same manner to form a chain or string of data hence the name blockchain.

Thanks to the marvellous advancement in information and technology, multiple blockchain records are maintained simultaneously by many of unrelated individuals and their computers. All sorts of updates are viewed immediately and manipulating any part of it is nearly impossible. As many people keep their own copies of the blockchain hence the technology is known as “distributed”.

There are hundreds of blockchains created by numerous groups to records all sorts of information including medical records, art, land records and much more. But if a blockchain is not distributed among many individuals and instead controlled by a single government, organization, group or person, then it ceases to be a blockchain at all and such a centralized system is simply considered as a database.

blockchain

What is a smart contract?

A smart contract amalgamates blockchain technology with contracts to make a more efficient and affordable ecosystem of doing business. In a smart contract, two parties doing business agree to exchange money for something else and if the requirements set by both parties of the contract are processed on the stipulated date, it gets activated; delivery of the purchase is initiated. But if the requirements are not met timely, the contract disqualifies and returns whatever it was procuring. For example, Anne wants 1 bitcoin from Barry and Barry wants $5,000. Both Barry and Anne agree that on January 1, 2017, both the bitcoin and cash will be deposited to the accounts that are linked with the smart contract.

On that stipulated date, the contract scrutinises the accounts to see if both the people fulfilled their obligations or not. Once verified, it will release the payment and bitcoin to their respective new owners. If not, the bitcoin and money are returns to their original owners thus preventing any kind of fraud.

Because the contract is publicly available in the network and is unalterable, it is very easy to keep both Barry and Anne responsible for their end of the deal. If anyone violates the agreement, the proof of what they should have done is easily accessed.

What is mining?

Mining is a complex computing process of recording and verifying information on the digital record known as the blockchain. Because mining requires great computational power, people do this work in return for money. Each computer that completes this process can earn a reward in digital money. To keep the blockchain network operating smoothly, only one block can be created at a time. There are several different ways to do this but let take a look at two of them:

  1. The most common means is known as proof of work and it required the computer nodes to work hard at solving a math problem. The first one to solve this problem would discover a new block and would record information on the blockchain. This earns them a reward in a particular cryptocurrency along with the fees paid for each transaction.
  2. The next mining technique that is popularly employed is called proof of stake. As per this system, people who hold a large amount of particular cryptocurrency are selected by the software to create new blocks. They are selected on a lottery-system based on chance. With proof of stake, no new coins are generated. Instead fees for verifying and recording transactions are given out.

With over 1,500 cryptocurrencies and many more being created each month, new and effective ways of mining are being explored and discovered.

Women In Cryptocurrency: Top 8 Women In Cryptocurrency

Checkout the following infographic on – Top 8 Women In Cryptocurrency, this infographic was developed by Mrbtc.org. This infogrphic is all about the most popular Crypto women and their achievements and contribution to this industry.

Related posts

What on Earth Is a Chatbot?

Mariana

6 Proven Ways To Get More Customers For Your Internet Based Business

Sarah Mullen

She who dares wins: 6 tips for a law firm startup

Guest Contributor