What Is A Cryptocurrency?

What Is A Cryptocurrency?

A cryptocurrency is a new type of currency or digital currency that uses cryptography (advanced mathematics) and advanced computer techniques. All this in order not to depend on central entities that issue and control money.

A Cryptocurrency is a purely digital P2P ( peer to peer ) form of money or currency . Being digital, it is possible to send them anywhere in the world in a matter of seconds. And best of all, we can do it without the need for intermediaries such as a bank. Also like any other currency, you can exchange them for goods and services. As we do today with traditional currencies such as the Euro or the Dollar.

So if they look so much like the money we know, why have they created them? . Well the short answer is: these digital currencies are definitely a better form of money. In fact, they are the best form of digital money that can exist. The reasons behind this statement are the security, transparency and privacy that allow us to experiment.

Features that we can experience thanks to blockchain technology . And it is that a blockchain is nothing more than a database supported by a decentralized network in its entirety.

But in addition to this, the blockchain makes use of advanced asymmetric cryptography. That is, it makes use of the well-known public key and private key. All this in order to create a payment system that allows you to send money with a global reach, incensible, secure and immutable. This has led to a boom in the development of this technology. A situation that we can see reflected in the thousands of sites that now accept them as a form of payment.

In this sense, from Bit2Me we have set ourselves the goal of teaching you everything you need to know about this form of digital money. This in order that you can get to know them and enjoy their benefits. For this we invite you to continue reading this article specially aimed at explaining everything you need to know about them.

Cryptocurrency vs FIAT: Which Is better?

As we said at the beginning, cryptocurrencies are a kind of digital currency, and they have a certain relationship with fiat money (traditional currencies). However, cryptocurrencies and fiat money have huge differences. Among these differences we can mention the organization and its control. In addition to the way in which value is evaluated by users.

In the case of cryptocurrencies, they are not controlled by any government or institution, they are decentralized. Furthermore, its value depends directly on the trust of users. However, fiat money is the complete opposite. It depends on the banks or the authorized central authority and governments for its operation. All this centralization allows these actors to manage these currencies at will.

Another main feature of cryptocurrencies is that they are based on cryptography . With this, it is sought that the operations are not easily modifiable. They are also usually the source of open source projects (auditable for anyone). But the most important thing is that your ledger (the blockchain or chain of blocks) is made up of a huge database network. Supported by thousands of computers around the world and operating in a decentralized manner and by consensus.

Another great advantage is that they are open source, anyone can access the code. With this they can develop a new cryptocurrency based on an existing one in the market. It also allows to validate the code or detect different problems and failures. This obviously has a great impact on their safety and also guarantees that their development is maintained over time.

Some important points

• They are not controlled / issued by any government or institution.

• Its value depends directly on the trust of its users.

• They are based on cryptography.

• They are open source.

• Your ledger is made up of a network of computers forming your blockchain.

• Most of them have high volatility.

• They allow you to carry out financial transactions in a decentralized way.

Blockchain: The Heart of Cryptocurrencies

This chain of blocks is nothing more than a form of registration of operations and totals. In it, the account of all the units of a cryptocurrency that is in circulation and all the operations carried out are kept.

Each cryptocurrency has its own blockchain, which performs the function of a general ledger or accounting book (among other missions). Therefore each of these currencies has its own register, that is to say its own accounting book of units and transactions.

This blockchain network is of a distributed nature, like the P2P networks of BitTorrent files . There is a whole network of interconnected computers throughout the world that validates and stores the information on this network.

Thanks to this, there are millions of backup copies synchronizing at all times to safeguard the information instantly. Thus, the information on the creation and distribution of money through transactions is immutable. And by immutable, it is understood that its manipulation is not possible.

The Origin of Cryptocurrencies

Its origin is in the 80s when the Cypherpunk movement bet on the use of cryptography as a means for social and political change.

In 1990 David Chaum developed a form of digital money called Digicash. This was a centralized electronic money that allowed anonymous and secure transactions. But seven years later, Adam Back devised Hashcash based on proof of work to reduce spam and DDoS attacks .

This software was the one who laid the foundations for the security and mining protocols of the cryptocurrencies of the future. Later, Wei Dai would design b-money. This was a virtual currency that used a very advanced crypto mining scheme. Although this project was never completed,b-money is considered by many to be the first cryptocurrency in the world.

But it was in 2008 that Satoshi Nakamoto , whose real identity is unknown , published the Bitcoin whitepaper . This was the birth of the first fully decentralized currency, Bitcoin . To achieve this, Nakamoto relied on proof-of-work blockchain technology devised by Adam Back, using Hashcash. Thus, Satoshi proposed using the SHA-256 algorithm , as a cryptographic hash function and a Proof-of-Work (PoW) system . Furthermore, Bitcoin was limited to an issue of just 21 million coins.

Since then, technology has caught and captured the attention of the entire world. Currently there are thousands of different cryptocurrencies, each one created in order to improve technology. However, few cases have achieved this goal and reached a high audience and users.

We talk about cases such as Ethereum, Bitcoin Cash , Dash , EOS , Monero , Grin or ZCash . Each of these cryptocurrencies have very particular characteristics with which they seek to improve their presence throughout the world. A healthy competition that seeks to provide the best that this technology can offer in all corners of the world.

What makes them an invention like no other?

Since the invention of this type of digital money, many specialists have talked about them and their unique characteristics. One of these specialists is Jan Lansky. Lansky carried out a work entitled "Possible State Approaches to Cryptocurrencies ", presented in 2018 in which he describes these digital currencies as follows:

• The system does not need a central authority. Thus, its status is maintained through a distributed consensus.

• The system maintains all units and their owner.

• The system defines whether new units can be created. In this case, the system must define the circumstances of their origin and how to determine the owner of the new units.

• Ownership of a drive can only be secured to a user cryptographically.

• The system allows unit transactions, in which the owner of said units is changed. A transaction can only be made if the current owner of these units can be proven.

• If two transactions are carried out on the same units, the system only executes one of them.

This series of characteristics contains the nature of cryptocurrencies and what makes them what they are. In other words, any digital currency system that meets these requirements can be considered a cryptocurrency in its entirety.

The future of cryptocurrencies

The future of crypto is bright. Since its inception in 2008, they have gone from being a simple curiosity, to being a very important global economic force. One driven by creativity and the birth of new projects and technologies thanks to the initial coin offering (ICO). But not only that, they have shown that another form of economic control is possible.

One where the economy does not respond to the interests and manipulations of power groups, but is completely free and decentralized. A form of economy where scourges such as uncontrolled inflation have no place.

But in addition, they have also opened the doors to an economy that reaches everyone in the world. It is no longer necessary for a person to have a bank account to send or receive money. A simple cryptocurrency wallet is enough and enough for such a task and to manage any digital asset of this nature. This opens the door to a true global financial revolution, which we are only beginning to witness.

Imagine that in the future you decide to buy a car or a house. It would only be enough to access a DAPP, apply for a loan by guaranteeing your coins and almost instantly your loan is approved. No need for paperwork, going to a bank and huge waiting times. This is just a sample of the immense power of cryptocurrencies, the blockchain and what we can expect in the future.

But the revolution does not stop there, in fact, it is possible to imagine an even more revolutionary world. One where each thing connected to the Internet can interact with the others safely. One where, regardless of which country you live in, you can access products and services anywhere in the world and pay for them without complications.

This is the power of cryptocurrencies. A power that tells us that their future is assured and that we are just beginning to build it. Despite this, the world of cryptocurrencies mobilizes millions of dollars daily around the world and continues to strengthen. This gives us an idea of ​​the current relevance of the cryptocurrency market.