Hello guys, I hope you are having a fantastic day. Welcome to World of meh , Today we will talk about what cryptocurrencies are. This is a concept that many people don't understand clearly Many people hear about cryptocurrency and also hear about Bitcoin, but they really don't know what they are What is cryptocurrency?
In order to explain what cryptocurrency is We can define what Bitcoin is first, which is nowadays, the must used cryptocurrency as well as being the first cryptocurrency invented and implemented Bitcoin was invented by an anonymous group of people called themselves, Satoshi Nakamoto.
Satoshi Nakamoto came with idea of Bitcoin in 2009 It is now an open source, which is implemented worldwide as the Bitcoin network Bitcoin is not only a digital coin It is also the technology behind the coin and all the defined infrastructure and the secure network. All this implemented to allow a Bitcoin or a fraction of a Bitcoin being transferred from user A to user B, in other words, Bitcoin is a technology that allows having a medium of exchange between a user A and a user B that at the same time uses a high level of encryption and security to do so The difference between the traditional financial transactions from the Bitcoin transactions. Is that in the Bitcoin network, we don't have a financial institution in between users
A and B It does not require a central banking or a single administration or a central management to process the transaction It is totally decentralised Bitcoin is totally independent and allows having a point-to-point or peer-to-peer transaction without any financial institution in the middle Then, the first question you probably ask yourself is, who does guarantee that that the transaction is completed without having any central authority? Another question you could ask yourself is, what is the currency used in order to achieve this? Another question is, where will you store the bitcoins?
To answer these questions we need to explain how Bitcoin works first Bitcoin uses what is called a ledger which is like an accounting book The ledger keeps track of all transactions in the Bitcoin network since the first transaction was made To do this, Bitcoin uses a technology called blockchain the blockchain as The word implies, is a chain of blocks and each block contains information of each transaction made In the case of Bitcoin, from the first block to the last block of the chain we can see the history of all transactions from the first transaction made Each ledger contains this information as the blockchain. These ledgers contain a replica of the Bitcoin blockchain and these are distributed all over the world and also stored in mining machines Each mining machine can be owned by miners following specific requirements but we're not going to go into details on these in this article.
So when we have a transaction from user A to user B, this transaction is recorded in each distributed ledger as an additional block in the blockchain and this is replicated worldwide in all existing ledgers There is another important concept in Bitcoin that is also important to understand in order for user A to send at Bitcoin or a fraction of a Bitcoin to user B, they need to have what is called a wallet each wallet has a private key and a public key. In order for A to send one bitcoin to B, user A needs to sign this with his or her privet key so that it can be uniquely identified Then, the transaction is signed with a public key so that it can be published in the Bitcoin network in the distributed ledgers. This is when miners come to play. All mining machines then automatically verify that the transaction is valid by using complex computational algorithms to verify that it is a valid new block in the blockchain If a hacker wants to create a fake Bitcoin, this is nowadays computationally impossible as it requires more computational power than all existing mining machines distributed worldwide as well as having to know all the history of the Bitcoin block chain, which is also computationally impossible to perform nowadays.
This is why miners get rewarded by having new bitcoins as these promotes the distributed system to grow as well as making it even safer. Now we have the answers to the questions we initially had Who guarantees that a transaction is completed and validated? The inter verification process of the distributed Bitcoin ledgers by using the Bitcoin mining machines worldwide What is the currency used? Depends on the cryptocurrency used, in the case of Bitcoin, a Bitcoin Where are the Bitcoin stored? in the Bitcoin blockchain Which is stored in the global distributed Bitcoin Ledgers, in this case each user has a number of Bitcoins or a fraction of a Bitcoin in a specific Bitcoin account address called wallet. The users access to this wallet by using his or her private key How are they transferred from user A to user B Using the Bitcoin network from one Bitcoin account to another Bitcoin account registered in the Bitcoin ledgers. This is how Bitcoin works, but it is not the only existing cryptocurrency nowadays .
There are more than 2000 cryptocurrencies and the number is growing with new cryptocurrencies projects in the market. Other cryptocurrencies work in a similar way as Bitcoin Using other variants, but the principle is similar Other cryptocurrencies, like Ripple XRP are more hybrid and can be used in a decentralised way but they can also be used in a centralised way like the inter bank transactions or inter corporate transactions, however, the principle of block chain is the same. All cryptocurrencies provide a universal currency that can be used globally. Not like the fiat currencies like the dollar or the euro that depends on the location and also centralised base Generating inflation and also promoting corruption I personally think that cryptocurrencies will replace or complement the disadvantages of the fiat currencies.
FAQ
1. What is the purpose of Cryptocurrency ?
Cryptocurrency can also be named as digital currency. This currency work same as other currency like USD, INR and PKR etc. Basic function of this currency is to allow users to make transaction faster and easir from any where of world without any fee.
2. What is Cryptocurrency in simple words ?
Crytpcurrency is a virtual currency, Which serves same as other currencies just like Dollar, Yen , Rupees and Pound. It can't be carried physically as bank notes and coin. It stores in digital wallets.
3. How to get Cryptocurrency ?
Many platform provide facility to buy crypto currency via credit card. You may earn cryptocurrency by joining different airdrops, Mining cryptocurrency or by freelancing and get payment through crypto.