You must have heard the term “Bitcoin,” “Ethereum,” “virtual money,” “Litecoin,” these terms are essentially the common names given to what is know in the tech/real world as “Cryptocurrency.”
What exactly is Cryptocurrency?
Using layman terms, cryptocurrency is referred to as encrypted virtual currency that is generated by using code. It mainly refers to a digital currency that is created using cryptography. This virtual form of money is just like other forms of exchange, the only difference is this virtual means of exchange makes use of information that has been encrypted, and this currency is also decentralized. The transactions that take place using cryptocurrency are added to a public record which is usually referred to as “Transaction Blockchain.” Cryptocurrency is easily transferable and it is a secure medium of exchange that can be used all over the world.
The term “Cryptocurrency Address” is very common, and it refers to a public address that has a private address that is matching which is used to receive cryptocurrency. You can simply refer to it as an email address that is unique to you alone where cryptocurrency can be received.
Origin of Cryptocurrencies
The first cryptocurrency was generated by Satoshi Nakamoto, an anonymous individual or group. He is the inventor of Bitcoin, and in his paper, he stated that it was not his intention to invent a currency. Satoshi was able to create this digital cash system in the era where lots of individuals tried and failed. His idea was birthed as a result of the numerous failed attempts, and he was able to find the missing piece to the puzzle which eventually birthed the first cryptocurrency.
In 2008, Satoshi Nakamoto released a paper that had a detailed explanation of what will eventually become Bitcoin. The Bitcoin was created in 2008 as the first decentralized currency, and in 2009, it was released to the public. The Bitcoin was the first electronic cash system that made use of peer to peer networking to avoid spending twofold. A large number of cryptocurrency have been generated after the release of the Bitcoin.
How Exactly Does Cryptocurrencies Work?
Cryptocurrency is created through a process referred to as ‘mining,’ the transferring and recording of the transaction in the public ledger are also through the process of mining. Mining essentially refers to the procedure of confirming transactions and putting them into the public record which is called Blockchain. The process of mining is much more complex and sophisticated than it seems, the miner must solve a series of computational puzzles that are just like normal puzzles but more complex to mine and generate cryptocurrency. The process of mining is open source which essentially means it is open to everyone. The process of mining is what adds value to the digital currency, and this is through a procedure referred to as ‘proof of work system.’
It is impossible to forge cryptocurrency as all cryptocurrency transactions make use of specific protocols to start any transaction. Every transaction has to be verified and validated by more than 40% of the users so there is no way cryptocurrency can be counterfeited.
Each cryptocurrency has its unique code and unique transactions as well. As mentioned earlier, all transactions are kept in a ledger system referred to as Blockchain. The Blockchain and transaction are also validated by a large percentage of users, so the system is essentially secure.