Today, Cryptocurrencies have become a worldwide phenomenon known by most people all around the world. Nowadays, all major organisations and financial services like major banks, accounting firms, governmental organisations and software companies have researched on Cryptocurrencies and some have even started blockchain projects. This is all because the Crypto money is becoming so popular worldwide henceforth it heading to becoming a worldwide currency.
What are Cryptocurrencies?
Satoshi Nakamoto, the unknown inventor of Bitcoin, in 2008 created the Cryptocurrency as a peer to peer electronic cash system. They are designed in a way that there is an internet-based medium of exchange which uses cryptographic functions to conduct financial transactions and they leverage blockchain technology in order to gain transparency and decentralisation among the like.
What makes Cryptocurrencies stand out and unique is that it is not controlled by any central government or authority. The decentralized feature and nature of the blockchain makes it theoretically immune to government interference and control.
How does it work?
To realise digital cash, you need a payment network with accounts, balances and transactions. One major problem that every network has to solve is to prevent double spending which is usually done by a central server that keeps records of all balances and transactions.
In a decentralized network like for the Cryptocurrencies,there is no such central server, which means that you need every single entity or user to do this job.
Every peer in the network needs to have a full list of all the transactions in order to check if future transactions are valid or an attempt to double spend. If the peers in the network disagree about one single minor balance, everything breaks, they need absolute consensus.
Everyone who deals with cryptocurrencies is called a miner. Since a decentralized network has no authority to delegate this task, a cryptocurrency needs some kind of mechanism to prevent one ruling party from abusing it.
In order for miners to respect this, Satoshi set the rule that the miners needed to invest some work of their computers to qualify for this task. In fact, they have to find a hash – a product of a cryptographic function – that connects the new block with its predecessor. This is called the Proof-of-Work. In Bitcoin, it is based on the SHA 256 Hash algorithm.
Once a transaction is signed, it is broadcasted to the network sent from one peer to every other peer. This is standard mining and peer-to-peer technology.
After a specific amount of time the transaction gets confirmed and only miners can confirm transactions. After all the confirmations, every note is added to its database and becomes part of the blockchain. For this job, the miners are rewarded with cryptocurrencies, for example Bitcoin.
Every miner competes to solve a cryptographic puzzle and after finding a solution, they can confirm the transaction and add it to the blockchain. As an incentive to do this, they then receive a payment from the network in the form of a cryptocurrency and the legitimacy of the transaction history is maintained.
Cryptocurrencies : Money of the future?
Cryptocurrencies are digital gold. Recently one Bitcoin reached the highest amount of $20 000USD.
Cryptocurrencies are becoming an increasingly fast and comfortable means of payment with a worldwide scope. It is sound money that is secure from the government or any political influence. People all over the world buy Bitcoin and other cryptocurrencies to protect themselves against the devaluation of their national currency.
Not forgetting to mention also that they are private and anonymous enough to serve as a means of payment for black markets and any other outlawed economic activity.
The revolution of the cryptocurrency becoming the money of the future is already starting to happen.
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