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Just like any currency, you can use cryptocurrencies to buy goods and services. However, cryptocurrencies are digital and use cryptography to secure transactions. In this beginners guide, we’ll cover the very basics of cryptocurrency.
Cryptocurrency is digital money. It’s a currency that has no physical form as it’s an asset created by software. However, unlike Paypal dollars or World of Warcraft tokens, this ‘digital currency’ uses cryptography for creating the assets and securing transactions.
Cryptography comes from the ancient Greek words kryptós “hidden”; and graphein, “to write”. In very basic terms, it’s about sending hidden messages that can only be read by the intended recipient. The use of cryptography enables us to have secure communication. The result is protected transactions, controlled unit creation, and verified transfers.
The theoretical concept of cryptocurrency existed long before the first digital cash debut. Early cryptocurrency advocates envisioned solving the practical and political limitations of fiat currencies through the application of computer science. During the ’90s, there were many attempts made to create a global digital currency, but they all failed.
After seeing the failed attempts, in 2008, a programmer (or programmers) under the pseudonym of ‘Satoshi Nakamoto’ tried to create a digital cash system without a central entity. Cryptocurrency officially made the jump from concept to reality in 2009 with the release of. It became the very first digital asset of value that you could send via the internet without the need for a specific third party approving the transaction.
Since then, there have been thousands of others created, with more popping up every month. Although many share the same core characteristics, new transaction processes, and innovative ways to solve problems are continually being developed.
In simple terms, cryptocurrencies are sequences of encrypted bits that are built over cryptographic functions and stored over a network. Most cryptocurrencies create new units through mining. This is a process where miners solve complex mathematical problems and are rewarded for their efforts. Miners also verify transactions. When the assets move from one account to another, a miner will confirm the transaction, every node has to add it to their respective database, and it becomes part of the blockchain. A transaction is only considered secure once it’s been added to the blockchain.
A blockchain is a Blockchain is a digital ledger that’s used for storing data on several servers across the world in a decentralized, trustless... More that records all of the transactions and validates the ownership of all the units. Copies of the blockchain are stored across the network in nodes. This process makes transactions extremely secure and eliminates fraud, such as double spending or spams.
Although cryptocurrencies were initially created as an alternative to physical money, cryptocurrency can be used for so much more. Cryptocurrency can currently allow you to:
More ways to use cryptocurrency are emerging all the time, as more and more businesses accept the crypto world, people are going to have the opportunity to use them for a range of transactions and serve a variety of needs.
In summary, cryptocurrency is a way of paying that gets rid of mediators represented by banks and makes all transactions extremely secure. The use of cryptocurrency in both public and private industries have their roles firmly set. Cryptocurrency will most likely continue to solve problems and add value in ways that we can’t even anticipate right now.