Cryptocurrencies are the byproduct of another invention, very few people know this. The man behind the Bitcoin invention, Satoshi Nakamoto, had no intention of inventing a currency. According to the announcement of Bitcoin he made in 2008, he said that he developed “A Peer-to-Peer-Electronic Cash System.”
Nakamoto created a decentralized digital cash system, and this is what made his invention important. So many people have tried to invent digital money before, with no success. He observed all the failed attempts and realized that they were all centralized. He sought to build a system that had no central entity—a peer-to-peer-network. And this gave birth to cryptocurrency.
Forget all the complicated definitions you have heard or read. In simple terms, cryptocurrencies are restricted entries in a database that nobody can change before fulfilling specific conditions.
A cryptocurrency has a network of peers, and each peer has a record of the history of all transactions and the balance of each account. In this case, a transaction is simply a file that states, “Carol gives X Bitcoin to James” and it is signed by Carol’s private key. It is just public key cryptography, nothing complicated. After being signed, the transaction is then broadcasted in the system—the whole network knows about the transaction immediately, but is confirmed after a given time.
Confirmation is essential in cryptocurrencies. If a transaction is not confirmed, it remains pending and vulnerable to forging. But after it’s confirmed, it becomes irreversible and cannot be forged; it’s now part of a blockchain. Miners who are eligible to confirm transactions are rewarded.
Everyone can be a miner. Due to the lack of a decentralized network, regulations have to be put in place to ensure that one ruling party does not abuse it. The rule, in this case, is that for you to become a miner, you have to invest in a computer that can handle cryptocurrency transactions. You must find a hash that associates the new block with its predecessor. This is known as the proof-of-work. Bitcoin uses the SHA256 Hash algorithm.
• Irreversible: a transaction cannot be reversed after confirmation. Not even Satoshi or your miner can reverse it.
• Pseudonymous: the accounts and transactions are not connected to the real world entities. You can barely know the real world identity of the owner of an address.
• Fast and global: transactions are completed instantly and confirmed shortly after. They take place globally, indifferent to your location.
• Secure: the coins are safely locked in a public key cryptography system. The only one who can send the currency is the owner of the private key.
• Permission less: you do not need anyone’s permission to use cryptocurrency.
• Controlled supply: the supply of tokens for most cryptocurrencies is limited.
• No debt but bearer: online currencies do not represent debts.
Online currencies are digital gold, and this currency is safe from political influence. Even if Bitcoin is the largest online currency, investors should look out for several cryptocurrencies. Today’s most popular cryptocurrencies include;
• Ethereum Classic
The cryptocurrency market is very wild and fast. Almost daily, new currencies are introduced, others die, some people get rich, and investors lose their money. But cryptocurrencies are not going anywhere; they are here to bring a revolution.