What is Cryptocurrency?

• 17 March 2017 | 1005 Views | By Mint2Save

What is it? The future money or just a unicorn?

Today, cryptocurrencies have become a worldwide phenomenon. Though known to banks and government, there are still many people who remain unaware of its significance. In the recent times, it would be a hard time to find out a major bank or accounting firm that did not seek interest in cryptocurrency. Even after all that many of the bankers, developers or consultants know only a little about it.

ABOUT CRYPTOCURRENCY:

In simple words, cryptocurrency is a Virtual asset projected to work as a medium of exchange using cryptography so as to secure the transactions and to control the creation of additional units of the currency. Satoshi Nakamoto, unknowingly invented the first cryptocurrency, Bitcoin, which he announced in 2008 which can be said from the fact that in his announcement he said he developed a Peer-to-Peer Electronic Cash System with the idea of preventing double-spending. The essential part of his invention was that he devised a way to build a decentralized digital cash system. As a matter of fact, cryptocurrencies are completely decentralized with no server or central authority.

UNDERSTANDING THE CONCEPT BEHIND CRYPTOCURRENCY:

Satoshi through his invention found out the missing pieces which led to realize digital cash. This is the reason why it is a bit complex, but if you get it, you‘ll know more about them than most people do. Let us try to understand with an example.

In the process of realizing digital cash you need a payment network. One major problem every payment network has to resolve is to avoid the so-called double spending: to prevent that one entity spends the same amount two times. Typically, this is done by a central server who keeps records about the balances.

However, in a decentralized network, you don‘t have this server. Thus, you need every solitary entity of the network to do this job. Every peer in the network requires to have a list with all transactions to check if future transactions are valid or an attempt to double spend.

Question arises: But how can these entities keep a consensus about this archive?

If the peers of the network disagree about only one single, minor balance, everything is wrecked. They need an absolute consensus. Usually, you take, a central authority to declare the correct state of balances. But how can you attain consensus without a central authority?

No one did it know until Satoshi appeared out of nowhere. In fact, nobody believed it was even probable.

Satoshi proved it was. His major innovation was to achieve consensus without a central authority. Cryptocurrencies are a part of this solution – the part that made the solution thrilling, captivating and assisted it to roll over the world.

Now that we have understood the concept behind it, we will look upon some properties.

Revolutionary properties:

Bitcoin, as a decentralized network of peers which keep a consensus about accounts and balances, is more a currency than the statistics you see in your bank account. What are these numbers more than entries in a database – a database which can be changed by individuals you don‘t realize and by rules you don‘t know?

Basically, cryptocurrencies are entries about token in decentralized consensus-databases. They are called Cryptocurrencies because the consensus-keeping process is secured by strong cryptography. Cryptocurrencies are made on cryptography. They are not protected by people or by trust, but by mathematics. It is more likely that an asteroid falls on your house than that Bitcoin address is negotiated.

Following are some of the cryptocurrencies –

• Bitcoin with a market cap of $18,665,819,442 and Price $1151.59.
• Litecoin with a market cap of $189,872,248 and Price $3.79.
• Ripple with a market cap of $233,178,377 and price $0.006253.

Unfolding the properties of cryptocurrencies we need to separate the monetary and transactional properties.

Transactional properties:

• Irreversible
• Pseudonymous
• Fast and global
• Secure
• Permission less

Monetary properties:

• Controlled supply: Most cryptocurrencies bound the supply of the tokens. In Bitcoin, the supply drops in time and will reach its concluding number somewhere in around 2140.
• No debt, but carrier: Cryptocurrencies don‘t represent debts. They just characterize themselves. They are money as hard as coins of gold.

Future of Cryptocurrency?

The market of cryptocurrencies is quick and wild. Nearly every day new cryptocurrencies emerge, old die, early adopters get prosperous and investors lose money. Every cryptocurrency comes with a promise, mostly a big story to turn the world about. Few survive the starting months, and most are pumped and dumped by investors.

Cryptocurrencies are here to pause – and here to change the world and it is already happening step by step. You can either stand beside or observe, or you can be a part of history in the making.