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 how does it work? Within this guide, I will answer all the questions you have about cryptocurrencies. I’m going to tell you when it was invented, how it operates and why it’s going to be so 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 virtually no time to waste. Let’s get going! When I hear a brand new word, I look up its definition inside my dictionary. Cryptocurrency is a new word for many people so let’s write a crypto definition.
Mining – Miners make an effort to solve mathematical puzzles first to set 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 applications that store public and private keys and enable users to send out and receive digital currency and monitor their balance.
Crypto Definition – Below is a list 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 may be 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 for every person online. Users don’t deal together through banks, PayPal or Facebook. They deal with each other directly. Banks, PayPal and Facebook are all trusted third parties. There are no trusted third parties in cryptocurrency! Note: They are called trusted third parties because users have to have confidence in them making use of their personal information in order to use their services. As an example, we trust the lender with the money so we trust Facebook with the holiday photos!
Pseudonymous: Because of this you don’t have to give any personal data to possess and utilize cryptocurrency. There are no rules about that can own or use cryptocurrencies. It’s like posting on a website like 4chan.
Trustless: No trusted third parties signifies that users don’t have to trust the device for it to work. Users have been in complete control of their funds 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 nearly impossible to hack. It’s also in which the crypto area of the crypto definition arises from. Crypto means hidden. When details 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 may be sent worldwide easily. Cryptocurrencies are currencies without borders!
This crypto definition is an excellent start but you’re still quite a distance from understanding cryptocurrency. Next, I want to tell you 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 struggling to understand the web. However, there was some very clever folks who had already realized exactly what a powerful tool it is actually. Some of these clever folks, called cypherpunks, thought that governments and corporations had too much power over our lives. They wished to use the web to offer the people around the globe more freely. Using cryptography, cypherpunks desired to allow users of the internet to possess additional control over their funds and information. As possible tell, the cypherpunks didn’t like trusted third parties in any way!
On 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 a number of the six things must be cryptocurrencies but neither had them all. At the end from the the nineties, both had failed. Satashi Nakamoto creator of bitcoinThe world would need to hold off 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 can do better. Their name was Satoshi Nakamoto and their creation was called Bitcoin.
Bitcoin became very 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 price of one particular Bitcoin is 7,576.24 US Dollars. Which is still a pretty good return, right? In 2010, a programmer bought two pizzas for 10,000 BTC within the first real-world bitcoin transactions. Today, 10,000 BTC is equal to roughly $38.1 million – a huge price to cover satisfying hunger pangs.