cryptocurrencies
November 3, 2020

What is cryptocurrency : 2021 guide

By 1bitcoincost
In 2016, you’ll have a hard time finding a big bank, a large accounting firm, a major software company or a government that hasn’t yet searched for cryptocurrencies, published an article about them or launched a so-called Blockchain project. But beyond the hustle and bustle and press releases, an overwhelming majority of people — even bankers, consultants, scientists and developers — have very limited knowledge of cryptocurrencies. They often fail to understand the basic concepts.  

What is cryptocurrency and how have cryptocurrencies become a secondary product of digital currency?

  Not many people know this, but cryptocurrencies have emerged as the secondary product of another invention. Satoshi Nakamoto, the unknown inventor of Bitcoin, the first cryptocurrency and always the most important, never intended to invent a currency.   In his press release on Bitcoin at the end of 2008, Satoshi said he had developed “an electronic peer-to-peer payment system”.   His goal was to invent something; many people couldn’t create before cryptocurrencies.   “Announce the first version of Bitcoin, a new electronic payment system that uses a peer-to-peer network to avoid double spending. It is fully decentralized, with no server or central authority.”  Satoshi Nakamoto, January 09, 2009, announcing Bitcoin on SourceForge.   The most important part of Satoshi’s invention was to find a way to develop a decentralized digital payment system. In the 1990s, there were many attempts to create digital currency, but they all failed.   “[…] After more than a decade of failing systems based on trusted third parties (Digicash, etc.), they are seen as a lost cause. I hope they can see the difference, that this is the first time, I think, that we are trying a system without third parties trust.” – Satoshi Nakamoto in an email to Dustin Trammell   After noticing the failure of all centralized attempts, Satoshi attempted to set up a digital payment system without a central entity. Like a peer-to-peer network for file sharing.   It was this decision that gave birth to the cryptocurrency. Satoshi found this absent link to make cryptocurrencies. The reason is a bit technical and complex, but if you understand it, you will know more about cryptocurrencies than most people. So let’s try to simplify things as much as possible.   To produce cryptocurrencies, you must have a payment network with accounts, balances and transactions. It’s easy to understand. A major problem that any payment network must solve is to prevent so-called double spending: to prevent the same entity from spending twice the same amount. Generally, it is a central server that records balances.   In a decentralized network, you don’t have that server. So every entity in the network has to do that work. Each peer in the network must have a list of all transactions to verify whether future transactions will be valid or an attempt at double expenditure.  

Maintain consensus on these records?

If the network peers do not agree on a single balance, even minor, everything is broken. We need absolute consensus. Usually, it is again a central authority that declares the balances good. But how can we reach a consensus without central authority? No one knew until Satoshi arrived. In fact, no one even thought it was possible. Satoshi proved that he did. Its main innovation was to reach a consensus without central authority. Cryptocurrencies are part of this solution—the part that made the solution exciting, fascinating and helped it spread around the world.  

What are cryptocurrencies, in practice?

If you remove all the fuss around cryptocurrencies and reduce them to a simple definition, you will find that these are only limited entries into a database that no one can change without meeting certain conditions. It may seem trite, but believe it or not, you define exactly a currency.   Take the money from your bank account: what else is entries into a database that can only be changed under specific conditions? You can even take coins and physical notes. What are they other than limited entries into a public physical database that can only be changed if you meet the requirement to physically own coins and tickets? Money is nothing more than a verified entry into some sort of database of accounts, balances and transactions.  

How do miners create coins and confirm transactions?

    Let’s look at the mechanism that governs cryptocurrency databases. A cryptocurrency like Bitcoin consists of a peer-to-peer network. Each peer has a record of the full history of all transactions and therefore the balance of each account.   A transaction is a contract that declares, “Tom gives X Bitcoins to Helena” and is signed by Tom’s private key. It’s a basic public key. Once signed, a transaction is broadcast on the network and sent from one peer to another. This is the basic peer-to-peer technology. Nothing special at all, again.  

How does it work?

  Someone’s asking for a transaction. The requested transaction is broadcast on the peer-to-peer network, consisting of computers called nodes.  

Validation

The node network validates the transaction and the user’s status using known algorithms. A validated transaction may involve cryptocurrency, contracts, records, or any other information. Once validated, the transaction is combined with others to form a new data block for the registry. The new block is then added to the existing blockchain, permanently and immutable.  

The cryptocurrency

Has no intrinsic value and therefore cannot be traded for a commodity, such as gold. Has no fitness and exists only on the network. Its supply is not determined by a central bank and the network is fully decentralized. Cryptocurrency is a way to share. It was created and stored electronically on the Blockchain, with encryption methods to control the creation of monetary pieces and prove the move of funds. BTC is the most famous example. The operation is known directly by the network. However it is only after the confirmation. Confirmation is an essential concept for cryptocurrencies. One could say that cryptocurrencies are only a matter of confirmation. As long as a transaction is not confirmed, it is pending and can be tampered with. When a transaction is confirmed, it is engraved in marble. It is no longer falsifiable, it cannot be reversed, it is part of an immutable record of historical transactions of said Blockchain. Only minors can confirm transactions. It’s their job in a cryptocurrency network. They take transactions, mark them as legit and propagate them over the network. Once a transaction is confirmed by a minor, each node must add it to its database. It’s part of the blockchain. For this work, miners are rewarded with a cryptocurrency token, for example by bitcoins. As the miner’s action is the most essential component of the cryptocurrency system, we will take a closer look at it.    

What are the miners doing?

Anyone can be a minor. To the extent that a decentralized network is not empowered to delegate this task, a cryptocurrency must have a mechanism to prevent a ruling party from abusing it. Imagine someone creating thousands of peers and spreading falsified transactions. The system would break immediately.   Thus, Satoshi defined the rule that miners must invest part of their computer to qualify for this task. In fact, they have to find a hash – the product of a cryptographic function – that connects the new block to its predecessor. This is called proof of work. For Bitcoin, it is based on the algorithm SHA 256 Hash.   You don’t need to know all the SHA 256’s aspects. You just have to know that this can be the basis of a cryptological puzzle that the miners help solve. Once obtaining a solution, the minor can build a block and include it to the network. As motivation, he can add a transaction that gives him a specific number of bitcoins. This is the only way to create valid bitcoins.   Bitcoins can only be created if miners solve a cryptographic puzzle. As the difficulty of this puzzle increases the amount of computing power invested by all miners, there is only a specific amount of cryptocurrency chips that can be created in a given period of time. This is part of the consensus that no peer in the network can break.    

Revolutionary properties

If you think about it, Bitcoin, as a decentralized network of peers who maintain consensus on accounts and balances, is more of a currency than the numbers you see in your bank account. What are these numbers other than entries into a database – a database that can be changed by people you don’t see and by rules you don’t know? Basically, cryptocurrencies are token entries in decentralized consensual databases. They are called CRYPTO-currencies because the consensus-building process is secured by robust cryptography. Cryptocurrencies are built on cryptography. They are not secured by individuals or trusts, but by mathematics. It is more likely that an asteroid will fall on your home if a Bitcoin address is compromised.   Regarding the properties of cryptocurrencies, we need to separate transactional properties from monetary properties. Although most cryptocurrencies share a set of common properties, these are not carved into stone.    

Transactional properties:

Irreversible

After confirmation, a transaction cannot be cancelled. Per person. And no one means anyone. Not you, not your bank, not the president of the United States, not Satoshi, not your miner. No one. If you send money, you send it. Point bar. No one can help you if you sent your funds to a scammer or if a hacker stole them from you on your computer. There is no safety net.

Pseudonym

Neither transactions nor accounts are linked to real-world identities. You collect bitcoins on addresses, which are comparable to arbitrary strings of approximatively 30 characters. It is generally possible to analyze the flow of transactions. It is not necessarily possible to connect the actual identity of users to those addresses.

Fast and global

Transactions spread almost instantly across the network and are confirmed within minutes. Because they happen in a worldwide network of machines, they are unconcerned by your physical location. It doesn’t matter if I send bitcoins to my neighbor or someone on the other side of the world.

Secure

Cryptocurrency funds are locked in a public key cryptography system. Only the owner of the private key can send a cryptocurrency. Strong cryptography and the power of large numbers make it impossible to violate this mechanism. A Bitcoin address is more secure than Fort Knox.

Without permission

You don’t have to ask anyone to use a cryptocurrency. It’s just software that anyone can download for free. After installing it, you can receive and send bitcoins or other cryptocurrencies. No one can stop you. There is no keeper.  

Money properties:

  1. Controlled supply: Most cryptocurrencies limit the supply of tokens. In bitcoin, the offer decreases over time and will reach its final number around 2140. All cryptocurrencies control the supply of the token by planning written in the code. This means that the monetary offer of a cryptocurrency at every moment in the future can be roughly calculated today. There are no surprises.
  2. No debt but bearer: The currency in your bank account is created by debt, and the numbers you see on your ledger are just debts. It is a debt recognition system. Cryptocurrencies do not represent debt. They’re just representing themselves. They are silver as tangible as gold coins.
  To understand the revolutionary impact of cryptocurrencies, you need to consider both properties. Bitcoin, a means of payment without permission, irreversible and pseudonymous, is an attack on the control of banks and governments over the monetary transactions of their citizens. You can’t stop someone from using Bitcoin, you can’t stop someone from accepting a payment, you can’t cancel a transaction.   As a currency with limited supply, controlled and not changeable by a government, bank or other central institution, cryptocurrencies attack the scope of monetary policy. They prevent central banks from controlling inflation or deflation by manipulating the money supply.  

Economy

  It is mainly because of their revolutionary properties that cryptocurrencies have been successful. Their inventor, Satoshi Nakamoto, didn’t even dream of it. While all other attempts to create a digital money system did not attract enough users, Bitcoin had something that provoked enthusiasm and fascination. Sometimes it is more like a religion than a technology.   U.S. mobile payments are expected to reach $142. billion by 2019.

Peer-to-peer

Peer-to-peertransferstake place when a person pays another person via a mobile device. The device uses either a downloaded app or a web application to initiate, authenticate or transfer funds.

Physical

“Physical” purchases are initiated by a mobile device when the buyer and seller are in the same place, usually a physical point of sale, where the product/service is immediately delivered.

Remote

“Remote” payments occur when a buyer buys goods or services via a mobile device, but without the seller’s presence, and the goods are not issued immediately (as in the case of online sales).   Cryptocurrencies are digital gold. Safe money, free from political influence. Money that promises to preserve and increase its value over time. Cryptocurrencies are also a fast and comfortable payment method of global reach. They are sufficiently private and anonymous to serve as a means of payment for the black market and other illegal economic activity.   But if cryptocurrencies are used more for payment, their use as a means of speculation and reserve of value overshadows the aspects related to payment. Cryptocurrencies have created an extremely dynamic and growing market for investors and speculators. Marketplaces such as Okcoin, Poloniex and Shapeshift allow you to exchange hundreds of cryptocurrencies. Their daily trading volume exceeds that of the main European exchanges.   At the same time, the practice of ICO (Initial Coin Distribution), mainly facilitated by Ethereum’s intelligent contracts, has given life to extremely successful crowdfunding projects, in which an idea is often enough to raise millions of dollars. In the case of “The DAO,” it was more than $150 million.   In this rich ecosystem of coins and tokens, you experience extreme volatility. It is common for a coin to earn 10% a day – sometimes 100% – to lose just as much the next day. If you are lucky, the value of your piece can reach 1000% in one or two weeks.   Although Bitcoin remains by far the most well-known cryptocurrency and most other cryptocurrencies have no non-speculative impact, investors and users should keep an eye on several cryptocurrencies. Here are the most famous :  

Bitcoin

It is the most famous and the first crypto. Bitcoin serves as a digital gold standard throughout the cryptocurrency sector, is used as a global means of payment and is the de facto currency of cybercrime, such as the dark net or ransom markets. After seven years of existence, the price of Bitcoin has gone from zero to more than $650 and its transaction volume has reached more than 200,000 daily transactions. There’s not much more to say: Bitcoin is here to stay and will be worth much more than you think.

Ethereum

The idea of the young genius cryptologist, Vitalik Buterin, rose to second place in the hierarchy of cryptocurrencies. Other than Bitcoin, its blockchain not only validates a set of accounts and balances, but also so-called statements. This implies that ETH can handle complex contracts and codes. This flexibility makes Ethereum the perfect instrument for the application of the Blockchain. But it has a cost. After the hacking of DAO, an intelligent contract based on the Ethereum, the developers decided to change course and do without consensus, which led to the emergence of the Ethereum Classic. On top of that, there are several Ethereum clones, and the Ethereum itself is a host of several tokens, such as DigixDAO and Augur. This makes Ethereum more of a family of cryptocurrencies than a currency. Should I buy bitcoin or etherum ?  

Ripple

It is perhaps the least popular – or most hated – project of the cryptocurrency community. Although Ripple has a native cryptocurrency (XRP), it is more of a network for dealing with debt recognitions than a cryptocurrency itself. XRP, the currency, does not serve as a medium to store and exchange value, but more like a token to protect the network from spam.   Ripple Labs, the company that operates the Ripple network, has created all XRP tokens and manages their distribution. For this reason, Ripple is often called pre-mined within the community and is not considered a true cryptocurrency or a good reserve of value. Banks, however, seem to like Ripple. At least they are adopting the system at an increasing rate. That’s why Ripple’s value can increase in 2021.

Litecoin

Litecoin is one of the first cryptocurrencies after Bitcoin and is nicknamed the money of digital gold bitcoin. Faster than Bitcoin, with more tokens and a new mining algorithm, Litecoin was a true innovation, perfectly designed to be the little brother of Bitcoin. “This facilitated the emergence of several other cryptocurrencies that used its code, but made it even lighter.” Dogecoin or Feathercoin are examples. While Litecoin has failed to find a case of actual use and has lost its second place after Bitcoin, it is still actively developed and traded and is kept in reserve in case Bitcoin fails.  

Monero

Monero is the most striking example of the cryptonite algorithm. They invented this algorithm to add the privacy features that were missing from Bitcoin. If you use The blockchain document each transaction and track the flow of transactions. With the introduction of a concept called ring signatures, the cryptonite algorithm  passed through this flow. The first cryptonite implementation, Bytecoin, had been heavily pre-mined and therefore rejected by the community. Monero was the first clone of Bytecoin not pre-mined and aroused a great awareness. There are several other incarnations of cryptonite with their own small improvements, but none has ever achieved the same popularity as Monero. Monero’s popularity peaked in the summer of 2016 when some dark net markets decided to accept it as a currency. This has resulted in a steady increase in price, although the actual use of Monero seems to remain disappointing. In addition to these cryptocurrencies, there are hundreds of others, from different families. Most of them are nothing more than attempts to reach investors and make money quickly, but many of them promise playgrounds to test innovations in cryptocurrency technology.    

Conclusion

The cryptocurrency market is fast and free. Almost every day, new cryptocurrencies emerge, old ones disappear, pioneers get richer and investors lose money. Every cryptocurrency comes with a promise, mostly a great story to transform the world. Few of them spend the first few months. Speculators pump and dump it. The coin survives like zombie until the last holder loses all hope of seeing a return on investment. The markets are dirty. But that doesn’t change the fact that cryptocurrencies are here to stay – and there to change the world. That’s already the case. All over the world, people buy bitcoins to protect themselves from the devaluation of their national currency. Especially in Asia, a dynamic market for remittances by Bitcoin has emerged and the net dark of cybercrime using Bitcoin is booming. A lot of companies are uncovering the potential of smart contracts or Ethereum tokens, the first tangible use of Blockchain technologies.   The revolution is already underway. Institutional investors are starting to buy cryptocurrencies. Banks and governments realize that this invention is likely to deprive them of any control. Cryptocurrencies change the world. Step by step. You can either stand apart and observe, or take part in the story in the making.

FAQ

The concept of cryptocurrency  is a concept that existed long before the creation of  Bitcoin. The company, DigiCash Inc. founded in 1989 by David Chaum, was founded to create the first virtual currency  used worldwide. DigiCash was a virtual currency company.

You can buy cryptocurrencies on echanges such as Coinbase, Binance for the most famous.

Here are the top places where you can buy crypto

Here are 9 reasons to learn blockchain:

Blockchain specialists are in high demand

They easily find well-paying jobs. knowledge of the main concepts,combined with basic skills, will ensure new career prospects and good incomes. Financial companies and startups are currently two key areas using blockchain. However, the diversity of vacancies is quite broad and continues to grow. You can apply for a position as a digital currency developer, analyst/trader/cryptocurrency miner, system/cloud engineer, etc. Specialists with a background in the humanities and humanities can become public relations officers, editors, or journalists.

 

It’s a state-of-the-art technology

According to reports, less than 1% of the world’s population uses blockchain technology. Meanwhile, at least half of the world’s population is owned by active Internet users. This means that you already have access to educational resources and some potential application areas. By learning more, you’ll be able to follow other technologies to come and adapt easily to time constraints.

 

It is a universal tool for various fields

Blockchain is a unique infrastructure mechanism that can be connected to different types of market infrastructure, integrated into existing systems, business processes, etc. All you need is the equivalent of a similar agreement or interaction, or a partnership between two parties. It is suitable for communication with investors, companies, managers, etc.

 

It’s a new level of digital and cybersecurity

We share tons of  personal information online without even perceive it. Even when you use thesis writing services,you may have privacy concerns. Blockchain teaches systems to identify the parties to the transaction. It transforms a person’s data into a set of ways to make simple and secure transactions. Given the growing number of information leak incidents and associated risks, this feature is crucial for companies that handle thousands of transactions and store customers’ personal data, including those providing memory writing services.

 

 

It’s a technology of the future

It took Blockchain only a few years to move from a new technology to a tool used by large corporations, banks and government agencies. It continues to evolve and promises to reveal the full potential of the future, through transparency and security. The blockchain provides a solid foundation for services that may cause concern due to past potential fraud (banking, medicine, legal field, etc.). It is already used in trading, formulating intelligent contracts and elections.

 

It reconsiders and facilitates business processes

Blockchain helps build trust between parties, makes communication less strained and speeds up transactions. For example, freight companies are testing block chain systems to deal with bureaucracy: drivers have less paper to fill out and managers can track the status of freight along the way. Divide a workflow into simpler actions by setting clear priorities and goals for each project. It also improves trust and loyalty between the parties.

 

This gives new ideas to start a business

Some admit that investing in the blockchain always carries risks. The results may not be immediate, but investors are still involved in creating innovative perspective platforms. The flexibility and increased efficiency provided in a kit will gradually change market dynamics and lead to fierce competition. In such circumstances, you have no choice but to propose something extraordinary.

 

This is the key to innovation

The blockchain is perhaps the first step towards the future that we see in science fiction films. Decades can pass until it takes centre stage in asset management, but the transition to blockchain platforms has already begun. The more companies and domains use it, the more versatile it becomes. Each iteration invests in the development of blockchain,generating new ideas and solutions. People are already buying real estate with Bitcoins, engineers are using it to avoid critical mistakes in their projects, and much more is to come.

 

 

Anyway, you’ll need to study it, so why not now?

The blockchain is an inflection point of an era. Sooner or later, it will no longer be “the complicated thing that IT and financial managers are talking about.” Integration into different areas of daily life will require you to understand how things work anyway. The sooner you do it, the easier it will be to embrace future innovations. And to get back to point 1, it’s a big win in the column plus your skills in a resume.