Hello friends, I hope you all are doing great. In today’s tutorial, we will have a look at detailed Introduction to Cryptocurrency. You may have heard the term cryptocurrency first time from your friend, family or colleague and you will be confused. What is it? Why would someone need cryptocurrency in their life? They may have told you about it briefly that it is like a dollar or other currency etc.
We have decided to publish a series of articles where we will explain cryptocurrency in simple and easy to understand language. So let’s walk through this together.
I am here to help you and going to explain it in the easiest way that anyone could understand. It is a complete beginner guide for the one who does nothing about cryptocurrency and heard about it first time in their life. Besides, you can check out Dchained to find tons of information about cryptocurrencies and how to work with them.
Before we further go into detail. Let me tell you now maybe there are not many people who do know about cryptocurrency but it is becoming globally phenomenal now.
The topics we are going to cover in this article are:
- What is cryptocurrency?
- History of cryptocurrency.
- What is the story of bitcoin?
- Cryptocurrencies in reality?
- What can we do with cryptocurrency?
- How does Cryptocurrency work?
- Name of the most popular cryptocurrencies.
- Can you transfer cryptocurrency to a bank account or trade for cash?
- Why should you buy a cryptocurrency?
What is cryptocurrency?
The easy answer to this question is: Cryptocurrency is digital money.
- Cryptocurrency is a digital or virtual currency and it doesn’t have any physical form. It is the medium of exchange in the digital world.
To secure transactions between mediums, it uses cryptography (cryptography is the skill of encoding code). Crypto means hidden and cryptography means hidden code that no one can understand except the sender and receiver. Cryptography makes transactions secure.
The aim of cryptocurrency is to do a transaction with each other without any third party i.e. banks.
History of cryptocurrency
- In 1990, few digital geeks try to make currency through cryptography because they didn’t want to depend on third parties for sharing their money and information.
- They wanted freedom because they thought the government had too much power in their lives. In other words, digital geeks didn’t seem to trust third parties.
- They tried to make digicash and cybercash on those times in the 90s but in the end, got failed in this attempt.
- After that, no one particularly seemed to work in this cryptocurrency field. But in 2009 an unknown entity “Satoshi Nakamoto” created Bitcoin.
- You have to understand what Bitcoin is to understand cryptocurrency.
What is the story of Bitcoin?
- It is a secret who Satoshi Nakamoto is. Because still no one knows either it is he or she or a group of people. He only communicates with others through email and crypto forums.
- Satoshi Nakamoto said in his announcement of bitcoin “A Peer-to-Peer Electronic Cash System is developed for Bitcoin”.
- Satoshi Nakamoto published a paper in 2008 and described how Bitcoin actually works. The First Bitcoin transaction was made on January 12 between Satoshi Nakamoto and a coder Hal Finney of 10 BTC.
- Within a time Bitcoin becomes more popular among different people who thought it is important and going to become more popular in the future. One Bitcoin was worth one dollar in April 2011. But in December 2017 one Bitcoin was worth more than 20,000 Dollars. Today the price of one Bitcoin is 4,991 Dollars.
- Now hundreds and thousands of people are currently using it and there is no third party included in this process. There are different famous websites that are accepting bitcoin currency on their websites like WordPress, Piratebay, ok cupid and Reddit.
- There are many other digital currencies that are working on the same basis but are using different codes for them like Ethereum, XRP, Litecoin, Primecoin, etc.
Cryptocurrencies in reality?
In the simpler word, the reality of cryptocurrencies is that If we take all the problematic equations out of cryptocurrencies and reduced all the noise. Then you will discover that it consists of only on simpler entries or records in the database and no one can change it until meeting a few particular conditions.
This maybe seems strange to you or usual, but the reality of the currency is this simpler.
Here is an example of your daily life.
Let’s talk about your bank account money. The money you have in your bank account is nothing more than entries in a database. These entries of the database only can be changed under some specific conditions. Hence money is all about verified entries in some sort of database of records and balances.
What can we do with cryptocurrency?
- In the past merchant was not accepting any cryptocurrency. But now day’s situation is different and merchants are accepting cryptocurrency.
- Cryptocurrency has so many benefits now. You can send your money to the family without getting extra charged fees by 3rd parties like banks etc. You have no longer to worry about an invalid check and payment fraud by different people or companies. All transitions will be secure and you can send them directly to anyone.
- Bitcoin is so common nowadays and people are using it for paying hotel bills, flights, apps, jewelers, college degrees and so many more.
- Different other digital currency of cryptocurrency is not common yet and not accepting widely by merchants. But things are changing slowly and even APPLE has authorized ten cryptocurrencies. Now people can pay through these cryptocurrencies for the app store.
- There are different market places like openBazar & Bitify that only accept cryptocurrencies.
How does Cryptocurrency work?
In cryptocurrency, there is not a single central record of the transaction. But they distribute many copies of the ledger around the world and each owner of each copy record every transaction. They trust each other. How?
Let me explain in a simpler word for you!
For example, you are going to buy something using cryptocurrency. You will give him all the details about yourself and then the merchant or shopkeeper will ask all the other bookkeepers who have a record of each owner that if that buyer is good for the money. Then the record keepers will check from their records to see if the buyer has enough money. If the buyer has enough money then they will tell the shopkeeper that he/she has money.
So, when the new transaction will be made now everyone will update their records to show the movement of money. Keep in mind that all of the bookkeepers and ledgers are lots of computers, not people.
Hence there is no way of making a fake transaction in it.
But if someone tries to change a ledger and it would not match the rest of the copies and its get rejected. Then one of the random bookkeepers will get a reward for it.
Name of the most popular cryptocurrencies
- Bitcoin: Bitcoin is the first cryptocurrency that started in 2009 by Satoshi Nakamoto. It is the most popular cryptocurrency and accepted globally.
- Ethereum: Ethereum is a programmatic cryptocurrency that allows developers to build different apps and technologies. It is the most trustable cryptocurrency after Bitcoin.
- Ripple: Ripple does not use blockchain method for the transaction. They use a different iterative consensus process for a transaction which makes it faster than Bitcoin. But it is a weak technique and hacker can hack easily. Ripple is, in fact, RTGS(Real Time Gross Settlement System).
- Bitcoin Cash: Bitcoin cash is a part of Bitcoin and Bitcoin support it in manufacturing ASICs Bitcoin mining chips.
- NEM: NEM use proof of work algorithm that is different from all other cryptocurrencies. NEM used proof of importance which requires users to already have few coins to get the new one. In this, you can track your transactions result and others too. It will tell you the importance of particular users.
- Litecoin: It started in 2011 and the intention of this cryptocurrency was to be the “digital silver” compared to Bitcoin which is “digital gold”. It is also a part of Bitcoin and this cryptocurrency can be mined. It can be used in transacting services and goods.
- Monero: Monero can provide you more privacy and you can’t trace easily through monero as comare to Bitcoin. It used signature technology that makes it untraceable and secure.
- Dash: Dash is actually digital cash and its use anonymization technology to secure the transaction. It was also known as Darkcoin and is secure and fast. It is a two-tire network.
- IOTA: Ledger technology does use in IOTA cryptocurrency. Proof of work requires in this also from a sender for the transaction.
Can you transfer cryptocurrency to a bank account or trade for cash?
Yes! Definitely, you can transfer cryptocurrency to a bank account or trade for cash. There are many banks that are making it possible with fast and secure options.
Why should you buy a cryptocurrency?
There are so many reasons for buying cryptocurrency is but the most essentials are:
- Easy to start and you can manage different and many accounts.
- Safe place from hacker and cybercriminals.
- Don’t need to share your personal information for buying cryptocurrency.
- A single nickname can buy you all the digital money.
- Millions of users are already using it and it getting bigger day by day.