What is Cryptocurrency?
Cryptocurrency is a digital version of money. Unlike the ‘Paper’ version that you can see, touch and hold, Crypto can’t be held in your hand or touched and it can only be seen online. This digital currency allows transactions to be carried out online and eliminates the need for paper currency.
The currency is exchanged digitally online. This process is known as cryptography.
Bitcoin was the first succesful digital currency to hit the online world. Satoshi Nakamoto is credited with the invention. Bitcoin has proven to be so succesful that a myriad of other Cryptocurrencies are emerging on an almost daily basis!
This decentralised cash system, is one of the reasons that Cryptocurrencies are so popular.
The de-centralised system is powered by its’ users and does not require third party, central authority or middleman to control it.
Transaction fees are lower as unlike traditional currencies, Cryptocurrencies do not require a central server to keep track/record of your balances.
Neither the government or the banks have any control over it. That is one of the reasons why the government has stepped in and started to regulate it.
Blockchain technology manages and maintains a growing set of data blocks, which are used by the decentralised network.
You have probably heard of being able to mine these Cryptocoins.
As a Cryptocoin gains popularity it requires more powerful machines to carry out (Mine) these transactions.
The Blockchain is similar to an online ledger, where all of the transactions are recorded. Once a transaction has been confirmed it cannot be reversed. It cannot be forged or hacked, it is a permanent record of the transaction, ‘The Blockchain’.
Cryptocurrencies are secured by complex mathematical equations which are not only very secure but, are also unlikely to be compromised.
Only miners are able to confirm a transaction. They record the transactions, verify them and then disperse the the information of the transaction to the network.
The miners are compensated for their work by rewarding them with a small amount of the Cryptocurrency that they are mining.
Anybody can be a miner. Miners are needed to solve complex Cryptologic puzzles. These puzzles are a set of very complex mathematical questions. If you complete the Cryptological puzzle successfully, you have ‘Built a Block’. This Block can then be added to the Blockchain (A chain of Blocks).
The miner is given permission to add the Cryptocurrency transaction to the system. Once the transaction is successfully added they are paid an amount of the Cryptocoin that they have mined.
This is the only way to create valid Cryptocoins. These Cryptocoins can only be generated if a miner can solve the Cryptological puzzle. Cryptocoins become harder to mine as more and more computing power is required to mine more and more complex Cryptological puzzles as the coin gains popularity.
Coins such as Bitcoin now require a huge amount of computing power to mine them, while lesser known Altcoins (Alternative Coins) can still be mined using an old PC or Laptop connected to the Internet.
What Determines The Value of the Cryptocurrency