What are Cryptocurrencies?
Cryptocurrency is a form of digital money that is designed to be secure and, in many cases, unknown. Cryptocurrency is an encoded decentralized digital currency transferred between peers and confirmed in a public ledger through a procedure known as mining.
The first cryptocurrency to capture the public imagination was Bitcoin, which was launched in 2009 by an individual or group known under the pseudonym Satoshi Nakamoto. As of September 2015, there were over 14.6 million bitcoins in circulation with a total market value of $3.4 billion. Bitcoin’s success has produced a number of competing cryptocurrencies, such as Litecoin, Namecoin and PPCoin.
A cryptocurrency is a digital or virtual currency linked with the internet that uses cryptography for security, the procedure of converting legible information into an almost uncrackable code, to track purchases and transfers.
Now it has developed its elements of mathematical theory and computer science to become a way to secure communications, information and money online.
Cryptography was born out of the need for secure communication in the Second World War. It has developed in the digital era with elements of mathematical theory and computer science to become a way to secure communications, information and money online.
Cryptocurrencies take their name from their use of cryptography. Cryptography is the study of the methods of encrypting information, primarily with the intention of sending a message securely and privately but also for tasks such as data security and authentication. Crypto, the prefix in both words, comes from the Greek word kruptos, which means “secret.” Cryptocurrencies incorporate many of the technologies and theories developed by cryptographers in order to create a digital money exchange system that is resistant to both censorship and fraud.
Two decades ago to 2008, there had been numerous efforts at creating a decentralized currency that would rely on cryptographic procedures and distributed networks. It is only with the launching of Bitcoin, however, the idea has been really grown fast and started to attract many followers all over the world.
Now there are thousands of cryptocurrencies available with various level of demand and popularity but Bitcoin remains the most popular cryptocurrency. Cryptocurrencies other than Bitcoin are often referred to as “altcoins.” While there are many altcoins that are simple duplicates on the Bitcoin system, the most successful ones tend to have a unique hook or advantage that Bitcoin either can’t or chooses not to provide. The best-known examples of popular altcoins include Ripple, Litecoin and Dogecoin.
How do Cryptocurrencies work?
Cryptocurrencies use decentralised technology to let users make secure payments and save money without the need to use their name or go through a bank or any third party. They run on a distributed public ledger called blockchain, which is a record of all transactions updated and held by currency holders in a chronological order.
Elements of cryptocurrency are created through a procedure called mining, which includes using computer power à complicated maths problems à generate coins. Users can also buy the currencies from brokers, then save and spend those using cryptographic wallets.
Cryptocurrencies and applications of blockchain technology are still emerging in financial terms and more uses should be expected.
Transactions including bonds, stocks and other financial assets could eventually be traded using the technology.
Cryptocurrencies are supported by math rather than the word of a government or financial institution. While they, like all currencies, still depend on their perceived value, their scarcity is based on complex mathematical questions and cannot be adjusted by any one group or person.
They are neither tied to the availability of physical goods, such as gold, nor can they be artificially created by governments or financial institutions like dollars can.
Cryptocurrencies use a distributed network to allow for a P2P (peer-to-peer) transaction system without the need for third parties. In order to keep this secure, cryptocurrencies utilize mathematical algorithms and a public ledger.
In order to ensure every transaction is genuine, complex mathematical equations are used to link each account with the amount of virtual currency the account holder would like to spend. Users, commonly referred to as Miners, dedicate their computing resources to solving these equations and are generally rewarded with a small amount of cryptocurrency.
What is the future of Cryptocurrency?
The market of cryptocurrencies is growing fast and wild. Nearly every day new cryptocurrencies develop and old die, early adopters get wealthy and investors lose money. Every cryptocurrency comes with a promise, mostly a big story to turn the world around. Few survive the first months, and most are pumped and dumped by speculators and live on as zombie coins until the last bagholder loses hope ever to see a return on his investment.
Digital currencies have been disreputably unbalanced because their market size is still relatively small. As the market cap for cryptocurrencies grows, so will their stability. Once that happens, they have the potential to be more stable than fiat currencies.
Cryptocurrencies are designed to be inherently rare, and their inflation grows at a slow, controlled rate. This potentially gives them more stability than currencies where governments, central banks and financial institutions can simply “add a few zeros” to the end of their bank account as needed.
Cryptocurrencies have the potential to change the financial world and in many ways already have. Bitcoin was the first, remains the largest and has the best chance at achieving mainstream adoption, but there are plenty others with innovative ideas