What is Cryptocurrency? Answers to This Burning Question
We love getting the question from our readers:
What is cryptocurrency:
Some people call it the best way to spend your days, just connected to a computer or smart device wherever you want to be. Perhaps you are on a beach in Bali or sitting on the rooftop of your condo opposite the Eiffel Tower. The world is your kingdom. An , sometimes, when your real-time alerts grab your attention, you decide to make a purchase. We know that it seems like the money of the future, but it’s really important to understand what cryptocurrency is before you try investing your precious money in this relatively new market.
An Introduction to Cryptocurrency
Think of the movement towards buying cryptocurrencies as a worldwide movement. It seems like it’s just for people who sit in front of computers, but the mainstream public, including banks, governments, and consumers, don’t grasp its importance. Most financial institutions, whether they admit it or not, will have investigated the current cryptocurrency market, and they may begin a blockchain-project. But, its potential remains a mystery.
Here’s How It Works
Think of digital cash as the beginning of our story. On the side, there was the cryptocurrency. What’s more, Satoshi Nakamoto, the unknown father of Bitcoin, the which is the most influential cryptocurrency, did not imagine or intend to invent this currency. He saw his work as creating intended to invent a currency. Instead, he viewed his work as the creation of a “A Peer-to-Peer Electronic Cash System.“ He announced his cash system in 2009, and it was called Bitcoin. It was completely decentralized. There was no central authority managing the system or a server providing the information. He created a digital cash system, and this led to the genesis of the first cryptocurrency.
Creating a Network
In order for there to be digital cash as in the cases of WigMarkets, there must be a network to provide for the movement of cash between the members inside it. You need a system that includes accounts, balances, and information on each transaction. But a payment network must be able to work without having double-spending as an option, an instance in which one party is able to spend sthe same amount twice. A typical system would use a central computer server to keep information about transactions.
The Limitations of Decentralized Networks
So, if there isn’t a single server in the network that keeps the information on all the transactions, then a decentralized network must ensure that every peer within it has the same list of transactions. Each peer must also have the ability to check whether future transactions can occur or if one party is trying to double spend. However, you could make the network work if the peers all have the same information, and they can achieve a consensus without that central computer telling them what all the balances should be.
The question becomes how every peer in the network can maintain a consensus about the records of transactions, which means absolute agreement with all other peers in the network. If there is no absolute consensus, the system won’t work. Satoshi solved this problem.
A peer-to-peer network as we’ve seen with Wigmarkets is a closed system. When a miner can confirm a transaction, after the time delay, it becomes a permanent entry in the Blockchain that gets recorded by every peer in the network. So, once it is confirmed that Lucy gives X bitcoin to Jose, and it is later confirmed by a miner’s stamp, the transaction becomes a permanent record in the database of every peer. Meanwhile, the miner gets a token of the Bitcoin for stamping the transaction between Lucy and Jose.