Cryptocurrency – I guess by now many of them must have heard about cryptocurrencies by now as they have become the global phenomenon in the current digital world. However, there might be few who are not aware of what a cryptocurrency is, what it does, its importance and there are many (banks, people, governments, companies) though knowing might not understand its importance. For all those non-savvy people who merely know nothing about cryptocurrency, we bring to you few aspects of what is cryptocurrency, how does it work and why do we use it.
What is cryptocurrency?
A cryptocurrency is a digital or virtual currency designed to work as a medium of exchange. It uses cryptography to secure its transactions as well as to control the creation of new or additional units of a particular cryptocurrency and also to verify the transfer of assets. It is an intangible form of currency, which has no physical attributes other than the computer network or smartphone it sits on, connected to thousands of computers globally.
Cryptocurrency has been around for some time in the world, which was born during the World War II. It was during the second world war that the need for secure communication and exchanges was essential. Thus, cryptography was born which is the process of converting legible information into an enigmatic code, transferring messages securely to and from various, unknown sources. Cryptography has since evolved into the digital age with elements of mathematical theory and computer science to now become a path to secured communications, information and money online, infiltrating computers and smartphones on a global scale.
There have been many attempts made to develop digital currency in the early 90s but all of them eventually failed due to several reasons. Systems like Flooz, Beenz, and DigiCash that have emerged on the market but ended up failing inevitably, have utilized a Trusted Third Party approach(proved non-trusted to them), in which the companies behind them verified and facilitated the transactions. The failure of these companies has what resulted in building a digital cash without central entity. In order to ensure a lasting and highly reliable technology, a decentralized control of cryptocurrency was introduced. This decentralized control works through a ledger called blockchain, which inspects and verifies digital currency transactions.
Satoshi Nakamoto, the inventor of Bitcoin, whose identity has yet to be verified, invented “Bitcoin”, the first and still most important cryptocurrency. The mysterious Satoshi never intended to invent a currency, but after witnessing the failed attempts of companies to invent a digital currency, invented Bitcoin in January 2009. It is a new electronic cash system that uses a peer-to-peer network to prevent double-spending and is completely decentralized with no server or central authority.
How does it work?
Cryptocurrency works similar to that of a bank credit on a debit card, where a complex system issues currency and records transactions and works behind the scenes to allow people to send and receive currency electronically. However, unlike bank credit, where banks and governments issue the currency and keep ledgers, here in cryptocurrency, an algorithm does. Cryptocurrency is a digital currency where all transactions are recorded in public ledger called a ‘blockchain.’ and uses cryptography. Cryptography is the process of converting legible information into an almost uncrackable code, to track purchases and transfers. The blockchain is the world’s leading software platform for digital assets. It is a ledger of records and the records in the blockchain are called blocks and are connected to the previous block. The whole chain is self-managed, and no one person or organization has control or access to the entire chain.
Why do we use it?
People from all over the world are using cryptocurrency as a safe and secure medium to transit money. Cryptocurrency can be used to send money to anyone anywhere in the world, almost instantly, with no middle hand or excessive fees. Some of the countries like Japan or India has already considered crypto coin as secondary or alternative currency for the transaction. Bitcoin is a cryptocurrency and worldwide payment system, the first decentralized digital currency. Bitcoin as a system works without a central bank or single administrator. While Bitcoin has dominated attention and its value escalated, more new digital currencies are emerging to challenge its leadership. Alternative cryptocurrencies such as Ripple, Neo and Dash are expected to see higher trading this year.