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 the questions you have about cryptocurrencies. I’m going to inform you when it was invented, how it operates and why it’s going to be very important down the road. At the end of this guide, you’ll be able to answer the question, “what is a cryptocurrency?” for yourself.
The industry of cryptocurrency moves fast so there’s virtually no time to waste. Let’s get started! When I hear a brand new word, I check out its definition within my dictionary. Cryptocurrency is really a new word for most of us so let’s write a crypto definition.
Mining – Miners try to solve mathematical puzzles first to put the following block on the blockchain and claim a reward.
Exchange – An exchange is actually a business (often a website) where one can 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 summary of six stuff that every cryptocurrency must be to ensure it to be called a cryptocurrency;
Digital: Cryptocurrency only exists on computers. There are no coins without any notes. There are no reserves for crypto in Fort Knox or perhaps the Bank of England!
Decentralized: Cryptocurrencies don’t have a central computer or server. They are distributed across a network of (typically) a large number of computers. Networks without having a central server are called decentralized networks.
Peer-to-Peer: Cryptocurrencies are passed from person to person online. Users don’t deal with one another 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: They may be called trusted third parties because users have to trust them using their private information to use their services. For example, we trust the financial institution with this money and we trust Facebook with this holiday photos!
Pseudonymous: Which means that you don’t must give any personal data to own and use cryptocurrency. You can 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 for it to work. Users are in complete control of their cash and data all the time.
Encrypted: Each user has special codes that stop their information from being accessed by other users. This is called cryptography and it’s almost impossible to hack. It’s also where crypto part of the crypto definition arises from. Crypto means hidden. When details are hidden with cryptography, it is actually encrypted.
Global: Countries have their own own currencies called fiat currencies. Sending fiat currencies around the globe is difficult. Cryptocurrencies can be sent all over the world 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 trying to achieve?’
The Origin of Cryptocurrency – In the early 1990s, a lot of people were still struggling to comprehend the web. However, there have been some very clever people that had already realized just what a powerful tool it is actually. Some of these clever folks, called cypherpunks, considered that governments and corporations had too much power over our lives. They wanted to search on the internet to offer the folks of the world more freely. Using cryptography, cypherpunks wished to allow users of the internet to get additional control over their cash and knowledge. That 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 of them had some of the six things should be cryptocurrencies but neither had every one of them. At the end of 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 in the cypherpunks and believed that they might do better. Their name was Satoshi Nakamoto along with 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 greater than twenty thousand US Dollars! Today, the buying price of a single Bitcoin is 7,576.24 US Dollars. Which can be still a pretty good return, right? During 2010, a programmer bought two pizzas for 10,000 BTC within the first real-world bitcoin transactions. Today, 10,000 BTC is the same as roughly $38.1 million – a big price to cover satisfying hunger pangs.