What Is Cryptocurrency? Everything You Need To Know.
Nowadays topics related to Blockchain are in trend and cryptocurrencies is one of those. So I decided to write post on Cryptocurrency.
The short and easiest answer to the title question is, Cryptocurrency is decentralized digital money. But what exactly cryptocurrency is and how does it work?
In this article I will explain you everything about Cryptocurrency and its working. I will tell you who invented it and why it’s going to be so important in the future. I will clear your all questions related to cryptocurrencies, so without wasting more time let’s dive into the topic.
What Is Cryptocurrency?
Cryptocurrency is digital or virtual currency designed to work as medium of exchange. It uses encryption techniques to regulate its use and generate its release. Cryptocurrency is completely decentralized that means no one has control over it. It is not regulated by any Government or any bank or any financial authorities.
It relies on the power of the Internet to guarantee its value and confirm transactions. It only exists only on computers and cryptocurrencies passed from one person to another person online, you not need to provide your personal information to own and to use cryptocurrency. It is based on Blockchain, to read about Blockchain click on link given below.
History of Cryptocurrency
Till 1990, most of people were still struggling to understand the Internet, where some clever folks had already realised what powerful tool it is. Cypher Punks was that clever folk, who thought that government and corporations had too much power over our lives. Using cryptocurrency technology, cypher wanted to allow Internet users to have more control over their money and information.
DigiCash & Cybercash were both attempts to create a digital money system, they had some of six things needed to be cryptocurrency but somehow at the end of 90’s both had failed.
After DigiCash and Cybercash failure, the world had to wait until 2009. In the 2009, first completely decentralized digital money system created. Satoshi Nakamoto was the person who created cryptocurrency and his creation was call Bitcoin. He had seen the failure of the Cypher Punks and though that they could do better.
How Does Cryptocurrency Work?
All cryptocurrencies use distributed ledger technology that removes third parties from their system. Most of cryptocurrencies use Distributed Ledger Technology (DLT). Cryptocurrencies are based on Blockchain. The first Blockchain was created by Satoshi Nakamoto for Bitcoin currency. A Blockchain is a database of every transaction that has ever made. Groups of information is called blocks are added to he database one by one and form long chain.
Transactions are made between peers using software called cryptocurrency wallets. The person who making transaction uses the wallet to transfer from one account to another. To transfer money, knowledge of a password associated with the account is needed. Transactions made between peers are encrypted and then broadcast to the cryptocurrency network and queued up to be added to the public ledger. All users of cryptocurrency have access to the ledger.
Each transaction leads back to unique set of keys. Who owns the set of keys, owns the amount of cryptocurrency associated with those keys. The transaction amount is public, but who sent the amount or who made transaction is encrypted.
What Is Cryptocurrency Mining?
All cryptocurrencies release to the world through a process call Mining. To mine this currency, you must attempt to solve a computational puzzle which is known as a Hash. Hash allows you to add the next block. All transactions are then recorded in the blockchain or public ledger. People around the world are competing to solve hash puzzle to earn cryptocurrencies. The Miners who succeed in solving the Hash, receives a block reward or an amount of the cryptocurrency they mined.
To mine these cryptocurrencies, you will need few tools. You will need a ASIC chips for your PC designed specially to mine cryptocurrency. There are many softwares available, that will explain you how these program work with your ASIC chip. To store mined cryptocurrencies you will need a wallet.
Mining is time-consuming, expensive and takes up large amount of energy. The cost of mining hardware and software is very high, not everyone can afford this mining setup. Mining consumes more electricity it might affect your electricity bill. Miners spend a lot of their time in deciding between powerful option or less costly option.
Is Cryptocurrency Safe?
There are many scams to be wary of. Still Cryptocurrency is new thing for the world, there are many misunderstandings and it’s easy to rip someone off. If you are smart and careful you can do cold storage that means keeping your wallet offline via paper wallet or unplugged hardware wallet can keep your cryptocurrency offline. You need to keep your PC updated and protected with Antivirus.
Can Cryptocurrency Be Hacked?
Yes, it can be hack. It’s something cryptocurrency owners need to wary of. So many owners choose to store them offline as soon as they purchase amount of digital currency. The most notable form of cryptocurrency hack is hacking cryptocurrency exchange. Once a cryptocurrency gone, it’s gone forever, you cannot recover it. Last year, South Korean Exchange Coinrail was hacked and lost over $40 million worth of coins. It’s first incident of hacked exchange.
So far, we have learned what is cryptocurrency and how they work. Now you how they are mined and you can store them into a wallet. Cryptography is a deep concept, cryptocurrencies more than just understanding Blockchain and Mining. There are many cryptocurrencies in the market like Bitcoin, Ethereum, Ripple, Lite, etc.
Cryptocurrencies have tremendous power to change our lives forever. You can take control of your money and your information. So that’s it for this article and I tried to covers everything in this post. If you any queries regarding cryptocurrencies, write them into the comment section.