What is Cryptocurrency?

Have you heard about Bitcoin before? Have you heard about word cryptocurrency before? Do you want to know what actually cryptocurrency is? Than this guide will be helpful for you.

What does wikipedia says about Cryptocurrency:

A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currency.

What does wikipedia says about Bitcoin:

Bitcoin is both a cryptocurrency and an electronic payment system invented by an unidentified programmer, or group of programmers, under the name of Satoshi Nakamoto.

All this definition sound confusing to you? Let me try to explain it for you in simple words:
  1. Cryptocurrency is digital currency.
  2. It can be transferred between two person without using any third party service providers. So it is called as peer to peer electronic cash.
  3. Cryptocurrency are far more secured than your usual internet banking.
  4. You will only have access to your funds if you don’t share your private key with others.
  5. You can remain completely anonymous while doing transactions.
  6. You don’t have to provide any of your personal details to start using cryptocurrency.
  7. Cryptocurrency can actually be earned for free.
  8. Cryptocurrency are gold of twenty first century.

How all this started?

The first decentralized cryptocurrency i.e. Bitcoin was developed by unknown developer known by his hypothetical name Satoshi Nakamoto in 2009. After than several cryptocurrencies were created like Namecoin was introduced in April 2011, Litecoin was introduced after few months on October 2011. All of these cryptocurrencies run on POW (proof of work) algo, the first POW/ POS (Proof of stake) hybrid was introduced as Peercoin.

What are the features of Cryptocurrency?

  1. Irreversible: After confirmation, a transaction can‘t be reversed.
  2. Pseudonymous: Neither transactions nor accounts are connected to real world identities.
  3. Fast and global: Transaction are propagated nearly instantly in the network and are confirmed in a couple of minutes.
  4. Secure: Cryptocurrency funds are locked in a public key cryptography system. Only the owner of the private key can send cryptocurrency.
  5. Permissionless: You don‘t have to ask anybody to use cryptocurrency.

Image source: https://blockgeeks.com/guides/what-is-cryptocurrency/

How Cryptocurrency works?

Cryptocurrency are entirely digital assets which don’t have any physical forms like cash. Like in bank your cryptocurrency/bitcoin address is tied with number of currency you have which is recorded in a decentralized database. Unlike bank’s database, this databases are distributed among all nodes (computer/servers that run cryptocurrency wallet) that will save a copy of that ledger/database so that even if one nodes/copy of ledger goes offline/deleted you will not loss any of your balance. But if your bank’s server goes offline you will not have access to your money, this is one of the interesting feature cryptocurrency have which makes a lot of sense.

But how does cryptocurrencies are generated? There are two types of cryptocurrencies namely POW (proof of work) and POS (proof of stakes). In POW miners will get free crypto as reward, amount can be different among different currencies. Mining also requires specific mining hardwares but in early days of launch when mining difficulty is not that high simple personal computer or laptop can also mine POW based coins.

On other hand, in POS the one who will just save their coins in their wallets will get extra coins based on annual interest set by developers/community.

Image source: https://blockgeeks.com/guides/what-is-cryptocurrency/

Some helpful links

  1. Coinmarketcap.com – Cryptocurrency market capitalizations
  2. xtnodes.com – Bitcoin node counter and statistics
  3. bitcoinfees.21.co– Transaction fee calculator for bitcoin
  4. Blockchain.info – Blockchain explorer + Web wallet
  5. Etherscan.io – Ethereum Blockchain explorer

More will be added later…

 

Thank you for Reading

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