A cryptocurrency is a digital form of money that works on a computerized network. Bitcoin is completely decentralized, and is controlled by any government. Moreover, Bitcoins are secured by cryptographic encryption. Cryptocurrency is often called crypto for convenience. The name cryptocurrency came from cryptography which is an encryption technology to secure data.
The idea of cryptocurrency was first conceived by an American cryptographer David Chaum as a form of electronic money in 1983 but that was not as developed as today’s cryptocurrency. After some modifications of this idea by various cryptographers and developers later in 2009, a pseudonymous person called Satoshi Nakamoto introduced the first cryptocurrency to the world. That was bitcoin. So, if you are planning to invest in Bitcoin, you might consider knowing how Blockchain prevents Bitcoin Double Spending.
Highlights of Cryptocurrency
- Decentralized: Cryptocurrencies are decentralized. Traditional fiat currencies like the Dollar or Euro are issued and controlled by the government and transactions are done by the banks as intermediaries. Unlike this, cryptocurrencies are not issued or controlled by the government.
- Blockchain technology: The crypto network is based on Blockchain technology. It uses the Blockchain mechanism to circulate among its users. The technology is a distributed database system. Suppose a group of computers connected via the internet make transactions with each other. So, each computer is making some transactional data that is being stored digitally in a ledger, and all the data are distributed among the computers equally. technology works. The transactional data are stored in the blocks. Whenever a new block gets verified, new units get added to Blockchain.
- Peer-to-peer network: Peer-to-peer means user to user. Cryptocurrency transactions happen in a peer-to-peer system. The Blockchain technology of crypto makes it possible to connect every user directly to each other. So, in this network, a user can send cryptos directly to other users or can receive cryptos in the same way.
- Open-sourced network: The crypto network is open-sourced. That means it is not bound within any community or group. It is open to all. Any people from anywhere in the world can use this network for crypto transactions.
Formation of Cryptocurrencies- Points To Note
Cryptocurrencies are created by mining technology. The people who mine new cryptos are called miners. Just like miners are needed for gold mining. When it comes to mining of Bitcoins, the use of highly-functional computers is utmost required. The mining process is very energy consuming and it needs strong hardware and CPUs.
In mining, a miner solves a cryptographic hash puzzle. The miner who successfully meets all the required criteria to solve the puzzle gets rewarded by new cryptocurrencies and thus new cryptos get into circulation. This is how the entire process of Blockchain works.
Benefits of Cryptocurrencies-
Below highlighted are certain benefits of cryptocurrencies that you need to take a look at. Know more below with these points.
- The cryptocurrency network is decentralized. So, people have their own control over their money and do not have to rely on banks or the government.
- The network allows peer-to-peer transactions. It indicates security and no third-party interactions are needed.
- The open-sourced network facilitates any user to transfer money from anywhere to anywhere they want.
- Transactions are faster than in the traditional banking system. International transactions get much less time.
- Transactional charges in this medium are almost negligible in domestic transactions as well as international transactions.
- The network is very secure by cryptographic encryption. Also, the data are stored data and time-stamped so they can’t be modified or removed.
- The crypto network is very transparent. All the data is evenly distributed to its users.
- One of the most important benefits of using this network is that your name and identity is not revealed at the time of sending or receiving money. It is anonymous.
Cryptocurrencies can also be used for trading and investment as an asset. Some of the cryptos like bitcoin gained so much value in these years that they are widely traded as digital assets and stores of value. Many investment platforms are being created around them to make investments easy.