Ultimate Guide To Learning Bitcoin & Cryptocurrency6 mins - Introduction
Over the past few years, cryptocurrency has become a global phenomenon. In simple words, cryptocurrency is a digital currency. It is one of those things that gained massive popularity within a short period of time. It is an internet-based system used to carry out financial transactions. Blockchain technology is leveraged to achieve transparency, decentralization, and immutability. One of the most important aspects of cryptocurrency is that it is decentralized. No central authority controls it. This way, cryptocurrencies are impervious to the old methods of government interference and control.
Two parties can directly send them to each other while using both private and public keys. The minimum amount of processing fee is involved in the transfer allowing the users affordable financial transactions rather than paying a hefty amount to the conventional financial institutions.
A Brief History
This isn’t common knowledge, but cryptocurrency’s invention was accidental. During another project, bitcoin surfaced on digital media as a side product. Bitcoin’s inventor, Mr. Satoshi Nakamoto never had the intention to make Bitcoin, which ranks as the first and one of the most important cryptocurrencies to exist today.
In late 2008, when he announced about Bitcoin, he stated that he had developed a Peer-to-Peer Electronic Cash System. He aimed to come up with something most people had been unsuccessful in, before digital cash came into being. Perhaps the only and the most significant aspect of his invention was that he had created a way to build a decentralized digital cash system. And thus, Bitcoin came into being –the first-ever digital currency to date. This began an era of digital currencies, and many others followed.
It is not that no one tried to create digital money before. Many did, back in the 90s but all attempts were unsuccessful.
How do cryptocurrencies work?
Now, let’s try and understand the working of cryptocurrencies. The first thing to know is that a network of peers exists that wants to carry out a digital financial transaction. Each peer possesses a record that contains the entire history of a transaction and the balance that each account holds. Cryptocurrency runs on basic p2p-technology.
Understanding a transaction, let’s say A gives X number of Bitcoins to B. A then signs the transaction with his private key. It is simple public-key cryptography and nothing more. After the signing process, the network broadcasts the transaction, which is sent off from a single peer to all other peers.
About Blockchain and Cryptocurrency
Though the entire network gets to know about the transaction right way, it only gets confirmed after a certain period of time. Confirmation is important in cryptocurrencies. One can even put in on record that cryptocurrencies entail nothing but confirmation.
As long as a transaction remains unconfirmed, it means that it is incomplete, pending and there are more chances of forgery. A confirmation sets the transaction in stone. Once a transaction is confirmed, no one can reverse or forge it because now that particular transaction has become a part of the ineradicable record of digital transactions we know as the blockchain.
Who can confirm the cryptocurrency transactions?
The task of confirmation of transactions lies with miners only. You can say that miners are the confirmation officers of the cryptocurrency network. These officers take transactions into account, stamp that they are 100% legal and then distribute them across the network. When a miner marks a transaction as confirmed, every node is required to add it to its database.
A node is a device on a blockchain network that is one of the building blocks of this technology, which allows the functioning, and survival of this system. They carry out numerous tasks and are distributed across a widespread network. The confirmed transaction then becomes part of the blockchain. The miners get a reward in the form of cryptocurrency like Bitcoins for doing their job.
The Properties of Cryptocurrency
Here are the properties of cryptocurrency:
Fast: The transactions are spread in the network immediately and get a confirmation in a few minutes. As transactions take place in a digital world, geographical boundaries don’t exist. Distance does not matter in this system, and you can send Bitcoin to someone on the other side of the world.
Disguised: The accounts and transactions by no means are linked to real-world identities. You receive the Bitcoins on so-called addresses, which are made up of a random chain of 30 characters. You can analyze the transaction flow, but cannot connect to the real-world identity of the users to whom these addresses belong.
Easy Use: There are no limitations. Anyone can use it easily and download for free. It is open to everyone. No one can prevent you from sending and receiving Bitcoins after you have installed it.
Non-reversible: You cannot reverse a transaction after confirmation. No one can. There is no way that you can reverse your action. Cryptocurrency does not involve a safety net you can fall into. You cannot insist on the bank to intervene or anyone else. If you have sent the money, it is gone. And if you have been unfortunate to have fallen for a scam and ended up transferring funds to them, there’s no turning back.
Safe: They are perfectly safe. The funds of cryptocurrency are secured in a public key cryptography system. A person who owns a private key can carry out a transaction. So, a bitcoin address is pretty strong, and the key numbers are impossible to crack into.
The cryptocurrency market is ever-evolving. It is fast and spontaneous. Every dawn sees a new cryptocurrency emerge only to watch an old one die. The early adopters make it rich, whereas the investors lose. The way things are going, cryptocurrencies are here to stay and change the digital transaction world. All over the world, people are buying Bitcoin to keep themselves safe from the devaluation of their national currency, particularly in Asia, where a strong market of Bitcoin remittance has already emerged.