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 all the questions you have about cryptocurrencies. I’m going to let you know when it was invented, how it operates and why it’s going to be very important later on. 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 no time to waste. Let’s get started! Once I hear a brand new word, I look up its definition in my dictionary. Cryptocurrency is a new word for most of us 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 can 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 must be to ensure that it is called a cryptocurrency;
Digital: Cryptocurrency only exists on computers. There are no coins with no 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 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 together directly. Banks, PayPal and Facebook are common trusted third parties. You will find no trusted third parties in cryptocurrency! Note: They are called trusted third parties because users must believe in them with their personal data in order to use their services. For example, we trust the lender with this money and that we trust Facebook with this holiday photos!
Pseudonymous: Because of this you don’t must give any personal data to possess and use cryptocurrency. There are no rules about that can own or use cryptocurrencies. It’s like posting online like 4chan.
Trustless: No trusted third parties implies that users don’t need to trust the program because of it to operate. Users are in complete control of their funds and data 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 nearly impossible to hack. It’s also where crypto portion of the crypto definition arises from. Crypto means hidden. When information and facts are hidden with cryptography, it really is encrypted.
Global: Countries have their own currencies called fiat currencies. Sending fiat currencies around the world is tough. Cryptocurrencies could be sent all over the world easily. Cryptocurrencies are currencies without borders!
This crypto definition is a great start but you’re still a long way from understanding cryptocurrency. Next, I wish to tell you when cryptocurrency was developed and why. I’ll also answer the question ‘what is cryptocurrency trying to achieve?’
The Origin of Cryptocurrency – During the early 1990s, a lot of people were still struggling to know the web. However, there was some very clever people that had already realized just what a powerful tool it is. A few of these clever folks, called cypherpunks, believed that governments and corporations had a lot of power over our way of life. They desired to use the web to offer the individuals around the globe more freely. Using cryptography, cypherpunks desired to allow users of the internet to have more control over their money and knowledge. As you can tell, the cypherpunks didn’t like trusted third parties at all!
On top of the cypherpunks, the to-do list was digital cash. DigiCash and Cybercash were both attempts to make a digital money system. They both had a number of the six things must be cryptocurrencies but neither had all of them. In the end from the the nineties, both had failed. Satashi Nakamoto creator of bitcoinThe world will have to delay until 2009 before fmlxdu first fully decentralized digital cash system was made. Its creator had seen the failure from 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 might 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 just one Bitcoin is 7,576.24 US Dollars. That is still an excellent return, right? In 2010, a programmer bought two pizzas for 10,000 BTC at 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.