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 planning to tell you when it was invented, the way it works and why it’s going to be essential in the future. In 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 almost no time to waste. Let’s get started! After I hear a new word, I check out its definition inside 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 set the following block on the blockchain and claim a reward.
Exchange – An exchange is really a business (usually 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 deliver and receive digital currency and monitor their balance.
Crypto Definition – Below is a listing of six things which every cryptocurrency must be in order for so that it is referred to as a cryptocurrency;
Digital: Cryptocurrency only exists on computers. You will find no coins without any notes. You can find no reserves for crypto in Fort Knox or perhaps the Bank of England!
Decentralized: Cryptocurrencies don’t use a central computer or server. They may be distributed across a network of (typically) a large number of computers. Networks with no central server are known as decentralized networks.
Peer-to-Peer: Cryptocurrencies are passed individually for each person online. Users don’t deal together through banks, PayPal or Facebook. They deal with each other directly. Banks, PayPal and Facebook are common trusted third parties. You can find no trusted third parties in cryptocurrency! Note: These are called trusted third parties because users have to have confidence in them with their personal information in order to use their services. As an example, we trust the financial institution with the money and we trust Facebook with our holiday photos!
Pseudonymous: Which means that you don’t have to give any personal information to possess and utilize cryptocurrency. There are no rules about who can own or use cryptocurrencies. It’s like posting online like 4chan.
Trustless: No trusted third parties implies that users don’t have to trust the device for it to function. Users will be in complete control over their funds and information 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 part of the crypto definition arises from. Crypto means hidden. When information is hidden with cryptography, it is encrypted.
Global: Countries have their own currencies called fiat currencies. Sending fiat currencies around the world is hard. 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 inform you when cryptocurrency was made and why. I’ll also answer the question ‘what is cryptocurrency seeking to achieve?’
The Foundation of Cryptocurrency – In the early 1990s, a lot of people were struggling to understand the web. However, there was some very clever folks who had already realized just what a powerful tool it is. Many of these clever folks, called cypherpunks, thought that governments and corporations had a lot of control of our lives. They desired to search on the internet to give the individuals around the world more freely. Using cryptography, cypherpunks wanted to allow users in the internet to get more control over their funds and information. That you can tell, the cypherpunks didn’t like trusted third parties in any way!
Near the top of the cypherpunks, the to-do list was digital cash. DigiCash and Cybercash were both attempts to make a digital money system. Both of them had a number of the six things should be cryptocurrencies but neither had every one of them. By 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 created. Its creator had seen the failure in the cypherpunks and thought that they could do better. Their name was Satoshi Nakamoto along with 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 more than twenty thousand US Dollars! Today, the buying price of a single Bitcoin is 7,576.24 US Dollars. Which is still a very good return, right? During 2010, a programmer bought two pizzas for 10,000 BTC in one of the first real-world bitcoin transactions. Today, 10,000 BTC is the same as roughly $38.1 million – a big price to pay for satisfying hunger pangs.