Cryptocurrency Explained - Cryptocurrency is the new development of digital currency based on Blockchain Technology. Crytocurrency use digital signatures known as hashes to encrypt & secure crypto payments. Get Cryptocurrency News & Cryptocurrency Explained.
What is cryptocurrency: Everything you need to know about cryptocurrency & start yourself with bitcoins?
Is cryptocurrency the 21st century unicorn - or the money of the future? This introduction explains what cryptocurrencies are. After reading this, you know more than most other people.
Cryptocurrency Explained: Cryptocurrency is the general English term and means cryptocurrency or cryptocurrency. Crypto refers to the fact that this form of digital money is based on cryptography or secret writing, from Greek, κρυπτει kryptei "hidden," and γράφω gráfo "writing".
Also read: The ultimate crypto list: 200+ links to blockchain & cryptocurrency blogs, books, movies, APIs & more
Today, cryptocurrencies are a worldwide phenomenon that most people have heard of. Although it is thought to be nerds and is not understood by most people, banks, governments and many companies are aware of their importance. Every self-respecting large bank, accountancy firm, software company or government agency has investigated cryptocurrencies, published a paper about it or started a so-called blockchain project.
But apart from a tsunami of messages and news, the vast majority of people - even bankers, consultants, scientists and developers - have very limited knowledge about cryptocurrency. They often do not understand the basic concepts and need to have Cryptocurrency Explained. Let's go through the whole story. What are cryptocurrencies? Where does cryptocurrency come from? Why would you learn about cryptocurrency? And what do you need to know about cryptocurrency?
How cryptocurrencies originated as a by-product of digital cash
Few people know it, but cryptocurrencies came into being as a by-product of another invention. Satoshi Nakamoto, the unknown inventor of Bitcoin, the first and most important cryptocurrency, never intended to invent a currency. In his announcement of Bitcoin at the end of 2008, Satoshi said he developed a "peer-to-peer electronic cash system".
Announcement of the first release of Bitcoin
Cryptocurrency Explained - Bitcoin is a new electronic cash system that uses a peer-to-peer network to avoid double expenditure. It is completely decentralized without server or central authority. - Translation of the announcement of Bitcoin by Satoshi Nakamoto, January 9, 2009, on SourceForge.
The most important aspect of Satoshi's invention was that he found a way to build a decentralized digital money system. In the nineties there have been more attempts to create digital money, but they all failed.
After more than a decade of failed Trusted Third Party based systems (Digicash, etc.), they see it as a lost cause. I hope they realize that this is the first time (that I know) that we are trying a non-trust based system. - Translation of an e-mail from Satoshi Nakamotoaan Dustin Trammell.
After all centralized attempts failed, Satoshi tried to build a digital money system without a central entity as a peer-to-peer network for file sharing. This decision became the birth of cryptocurrency. Cryptocurrency Explained - The reason why is a bit technical and complex, but if you understand it, you know more about cryptocurrencies than most people.
Let me explain it as easily as possible: To realize digital cash you need a payment network with bills, balances and transactions. A big problem that every payment network has to solve is to prevent the so-called double expenditure: prevent the same entity from spending the same amount twice. Usually this is done by a central server that keeps the balance. You do not have this server in a decentralized network. You therefore need every single entity of the network to perform this task.
Every peer in the network must have a list of all transactions to check if future transactions are valid or an attempt to double their expenses. But how can these entities maintain consensus on these archives? If the peers of the network do not agree on just a single, small balance, everything is broken.
They need an absolute consensus. Usually you take a central authority again to explain the right balance. But how can you reach consensus without a central authority? Nobody knew until Satoshi emerged from nowhere.
Nobody even believed that it was possible. Satoshi proved that it was. His most important innovation was to reach consensus without a central authority. Cryptocurrency Explained - Cryptocurrencies are part of this solution - this is what makes it so exciting and fascinating and helped spread worldwide.
What are cryptocurrencies really?
If you remove all the noise around cryptocurrency and reduce it to a simple definition, you find out that it is a few items in a database that no one can change without meeting specific conditions.
This may seem normal, but believe it or not: this is exactly how you can define a currency. Take the money in your bank account: that is nothing more than entries in a database that can only be changed under specific conditions.
Cryptocurrency Explained: You can even take physical coins and banknotes: how are they other than limited entries in a public physical database that can only be changed if you compare the condition to the physical possession of the coins and banknotes? Money has everything to do with a verified item in a kind of database with accounts, balances and transactions.
How 'miners' create coins and confirm transactions
Let's look at the mechanism that manages the databases of cryptocurrencies. A cryptocurrency such as Bitcoin consists of a network of peers. Each peer has a record of the complete history of all transactions and thus of the balance of each account.
A transaction is a file that says "Henk gives X Bitcoin to Ingrid" and is signed by Bob's private key. It is standard cryptography with public keys, nothing special at all. After signing, a transaction is broadcast on the network, sent from a peer to every other peer. This is standard p2p technology. Nothing special :).
That looks something like this:
Miners
Source: Tech.eu
Miners confirm transactions
The transaction is known almost immediately throughout the network. But it is only after a certain time that he is confirmed. Confirmation is a critical concept in cryptocurrencies. Cryptocurrency Explained - You could say that cryptocurrencies are all about confirmation. As long as a transaction is unconfirmed, it is pending and can be forged. When a transaction is confirmed, it is definitively recorded. It is no longer marketable, it cannot be reversed and is now part of an unchanging overview of historical transactions: of the so-called blockchain.
Only cryptocurrency 'miners' (miners) can confirm transactions. This is their work in a cryptocurrency network. They take transactions, label them as legitimate and distribute them in the network. Cryptocurrency Explained - After a transaction has been confirmed by a miner, each node must add it to its database. It has become part of the blockchain. For this job, the miners are rewarded with a token of the cryptocurrency, for example with Bitcoins. Because the activity of the miner is the most important part of the cryptocurrency system, we have to stay a moment and go deeper into it.
What else do you do?
In principle, everyone can be a cryptocurrency miner. Since a decentralized network is not authorized to delegate this task, a cryptocurrency needs a mechanism to prevent a ruling party from abusing it. Imagine someone spreading thousands of forged transactions.
So Satoshi made the rule that the miners have to invest some work from their computers to qualify for this task. In fact, they must find a 'hash' - a product of a cryptographic function - that connects the new block with its predecessor. This is called Proof-of-Work. At Bitcoin it is based on the SHA 256 Hash algorithm.
Cryptocurrency Explained: You do not have to understand SHA 256 in detail. It is only important that you know that this can be the basis of a cryptological puzzle that the miners have to solve. After a miner has found a solution, he can build a block and add it to the blockchain.
As a reward he has the right to add a so-called coinbase transaction that gives him a specific number of Bitcoins. This is the only way to create valid Bitcoins. Bitcoins can only be created if minors solve a cryptographic puzzle.
The difficulty of this puzzle increases the amount of computer power that all miners invest. Therefore, only a limited amount of cryptocurrencies can be made, in a limited amount of time.
Learn all about Blockchains and have Blockchain Technology Explained, Visit: Cryptocurrency Explained - Cryptocurrency is the new development of digital currency based on Blockchain Technology. Crytocurrency use digital signatures known as hashes to encrypt & secure crypto payments. Get Cryptocurrency News & Cryptocurrency Explained.
What is cryptocurrency: Everything you need to know about cryptocurrency & start yourself with bitcoins?
Is cryptocurrency the 21st century unicorn - or the money of the future? This introduction explains what cryptocurrencies are. After reading this, you know more than most other people.
Cryptocurrency Explained: Cryptocurrency is the general English term and means cryptocurrency or cryptocurrency. Crypto refers to the fact that this form of digital money is based on cryptography or secret writing, from Greek, κρυπτει kryptei "hidden," and γράφω gráfo "writing".
Also read: The ultimate crypto list: 200+ links to blockchain & cryptocurrency blogs, books, movies, APIs & more
Today, cryptocurrencies are a worldwide phenomenon that most people have heard of. Although it is thought to be nerds and is not understood by most people, banks, governments and many companies are aware of their importance. Every self-respecting large bank, accountancy firm, software company or government agency has investigated cryptocurrencies, published a paper about it or started a so-called blockchain project.
Cryptocureency Explained Bonus Info: https://cryptocurrencyexplained.yolasite.com/
But apart from a tsunami of messages and news, the vast majority of people - even bankers, consultants, scientists and developers - have very limited knowledge about cryptocurrency. They often do not understand the basic concepts and need to have Cryptocurrency Explained. Let's go through the whole story. What are cryptocurrencies? Where does cryptocurrency come from? Why would you learn about cryptocurrency? And what do you need to know about cryptocurrency?
How cryptocurrencies originated as a by-product of digital cash
Few people know it, but cryptocurrencies came into being as a by-product of another invention. Satoshi Nakamoto, the unknown inventor of Bitcoin, the first and most important cryptocurrency, never intended to invent a currency. In his announcement of Bitcoin at the end of 2008, Satoshi said he developed a "peer-to-peer electronic cash system".
Announcement of the first release of Bitcoin
Cryptocurrency Explained - Bitcoin is a new electronic cash system that uses a peer-to-peer network to avoid double expenditure. It is completely decentralized without server or central authority. - Translation of the announcement of Bitcoin by Satoshi Nakamoto, January 9, 2009, on SourceForge.
The most important aspect of Satoshi's invention was that he found a way to build a decentralized digital money system. In the nineties there have been more attempts to create digital money, but they all failed.
After more than a decade of failed Trusted Third Party based systems (Digicash, etc.), they see it as a lost cause. I hope they realize that this is the first time (that I know) that we are trying a non-trust based system. - Translation of an e-mail from Satoshi Nakamotoaan Dustin Trammell.
After all centralized attempts failed, Satoshi tried to build a digital money system without a central entity as a peer-to-peer network for file sharing. This decision became the birth of cryptocurrency. Cryptocurrency Explained - The reason why is a bit technical and complex, but if you understand it, you know more about cryptocurrencies than most people.
Let me explain it as easily as possible: To realize digital cash you need a payment network with bills, balances and transactions. A big problem that every payment network has to solve is to prevent the so-called double expenditure: prevent the same entity from spending the same amount twice. Usually this is done by a central server that keeps the balance. You do not have this server in a decentralized network. You therefore need every single entity of the network to perform this task.
Every peer in the network must have a list of all transactions to check if future transactions are valid or an attempt to double their expenses. But how can these entities maintain consensus on these archives? If the peers of the network do not agree on just a single, small balance, everything is broken.
They need an absolute consensus. Usually you take a central authority again to explain the right balance. But how can you reach consensus without a central authority? Nobody knew until Satoshi emerged from nowhere.
Nobody even believed that it was possible. Satoshi proved that it was. His most important innovation was to reach consensus without a central authority. Cryptocurrency Explained - Cryptocurrencies are part of this solution - this is what makes it so exciting and fascinating and helped spread worldwide.
What are cryptocurrencies really?
If you remove all the noise around cryptocurrency and reduce it to a simple definition, you find out that it is a few items in a database that no one can change without meeting specific conditions.
This may seem normal, but believe it or not: this is exactly how you can define a currency. Take the money in your bank account: that is nothing more than entries in a database that can only be changed under specific conditions.
Cryptocurrency Explained: You can even take physical coins and banknotes: how are they other than limited entries in a public physical database that can only be changed if you compare the condition to the physical possession of the coins and banknotes? Money has everything to do with a verified item in a kind of database with accounts, balances and transactions.
How 'miners' create coins and confirm transactions
Let's look at the mechanism that manages the databases of cryptocurrencies. A cryptocurrency such as Bitcoin consists of a network of peers. Each peer has a record of the complete history of all transactions and thus of the balance of each account.
A transaction is a file that says "Henk gives X Bitcoin to Ingrid" and is signed by Bob's private key. It is standard cryptography with public keys, nothing special at all. After signing, a transaction is broadcast on the network, sent from a peer to every other peer. This is standard p2p technology. Nothing special :).
That looks something like this:
Miners
Source: Tech.eu
Miners confirm transactions
The transaction is known almost immediately throughout the network. But it is only after a certain time that he is confirmed. Confirmation is a critical concept in cryptocurrencies. Cryptocurrency Explained - You could say that cryptocurrencies are all about confirmation. As long as a transaction is unconfirmed, it is pending and can be forged. When a transaction is confirmed, it is definitively recorded. It is no longer marketable, it cannot be reversed and is now part of an unchanging overview of historical transactions: of the so-called blockchain.
Only cryptocurrency 'miners' (miners) can confirm transactions. This is their work in a cryptocurrency network. They take transactions, label them as legitimate and distribute them in the network. Cryptocurrency Explained - After a transaction has been confirmed by a miner, each node must add it to its database. It has become part of the blockchain. For this job, the miners are rewarded with a token of the cryptocurrency, for example with Bitcoins. Because the activity of the miner is the most important part of the cryptocurrency system, we have to stay a moment and go deeper into it.
What else do you do?
In principle, everyone can be a cryptocurrency miner. Since a decentralized network is not authorized to delegate this task, a cryptocurrency needs a mechanism to prevent a ruling party from abusing it. Imagine someone spreading thousands of forged transactions.
So Satoshi made the rule that the miners have to invest some work from their computers to qualify for this task. In fact, they must find a 'hash' - a product of a cryptographic function - that connects the new block with its predecessor. This is called Proof-of-Work. At Bitcoin it is based on the SHA 256 Hash algorithm.
Cryptocurrency Explained: You do not have to understand SHA 256 in detail. It is only important that you know that this can be the basis of a cryptological puzzle that the miners have to solve. After a miner has found a solution, he can build a block and add it to the blockchain.
As a reward he has the right to add a so-called coinbase transaction that gives him a specific number of Bitcoins. This is the only way to create valid Bitcoins. Bitcoins can only be created if minors solve a cryptographic puzzle.
The difficulty of this puzzle increases the amount of computer power that all miners invest. Therefore, only a limited amount of cryptocurrencies can be made, in a limited amount of time.
Learn all about Blockchains and have Blockchain Technology Explained!
Cryptocureency Explained Bonus Info: https://blockchaintechnologyexplained.yolasite.com/
