Cryptocurrency is a digital currency. A type of digital money that is designed to be more secure and anonymous compared to regular money. It’s made from two words: currency and cryptography. Currency is a word used to describe a system of money that is in use in a country. Cryptography is the art of writing or solving codes. The idea was born from a need for secure communication during World War 2 so that enemy forces could not intercept important transmissions. Since then, it has evolved thanks to technological advances and cryptography can now be used to secure everything from communication to information and also money.
The very first cryptocurrency was Bitcoin and it was created by a Japanese computer science expert by name of Satoshi Nakamoto. However, this is just the name that claims to have created the first blockchain database and thus gave birth to the first cryptocurrency. People don’t know if it’s a real name, a pseudonym, or the name given to a group of people. Since then, there have been hundreds of different cryptocurrencies, but Bitcoin still remains the strongest.
How does cryptocurrency work?
Cryptocurrency is known as a decentralized currency. This means there is no single entity (like the government) that can control it or print more. There can only ever be 20,999,999.9769 Bitcoins in the world due to how the system works, and the value changes drastically depending on conditions that are created by the nodes of a peer-to-peer network. Essentially, this means that no one can control, create, or “print” extra Bitcoin, thus ruling out the possibility of counterfeit Bitcoin.
Cryptocurrencies use this security to their advantage by recording all transactions in a digital public ledger known as a blockchain. It records everything including currency holders, and every node in the system must accept a transaction before it is written in the digital ledger. If someone tries to edit or make a separate entry, it will be rejected if the system finds it to be fraudulent.
Bitcoins and other cryptocurrencies are created through “mining”. Essentially, it involves using computational power to solve complicated mathematical puzzles. Once the puzzle is solved, every member that contributed receives a portion of the reward.
Cryptocurrency can be bought and traded like any other currency, but it can also be used to make purchases over the internet. It can be stored in an online wallet, or you can purchase hardware wallets that look like USB drives to safely store your currency.
Why do we use cryptocurrency?
Cryptocurrencies are in high demand because they offer a secure currency to exchange goods. They provide some level of anonymity unlike other currencies and because it is a global currency, there are no exchange rates to deal with and no banks to align with. The transactions are always tracked, cannot be faked and there is a finite amount. No one can control the value of Bitcoin but the network itself.
Cryptocurrencies are often involved with illegal activity due to their anonymity but have since taken on a new light thanks to public exposure and more general awareness of what cryptocurrencies are and how they can integrate into society.
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