Understanding of Cryptocurrency [Ultimate Guide For Beginner]
What the Meaning of cryptocurrency: 21st-century unicorn – or the money of the future?
This article will explain about cryptocurrencies, the writer hope that reader can know much more about this cryptocurrencies.
At the present time cryptocurrencies become most people talk about. But, there are many people who don’t know about this functional technology, for example: banks, governments and many companies.
In 2016, there are many people who get difficulties to find a major bank, finance company, IT Company or government which is not use this technology or start a so-called blockcahin-project.
Then from the press releases to the many people – even bankers, consultants, scientists, and developers – they cannot understand the meaning of this cryptocurrencies. So, that is why they fail to give the meaning of the basic concepts.
People should know about the understanding of cryptocurrencies?
What is the original word of cryptocurrency?
The reason why people should understand the function of cryptocurrency?
What people should know about Cryptocurrency?
Understanding of cryptocurrency and Using cryptocurrencies emerged as a side product of digital cash
There are few people who don’t know about the function and what is cryptocurrencies as a side product of invention cash tool. The inventor of Bitcoin, the leader and still become a main tool cryptocurrency Satoshi Nakamoto, never want to invent a currency.
Satoshi said that he developed “A Peer-to-Peer Electronic Cash System”, in his speech of Bitcoin Launching in late 2008.
Satoshi had purpose to invent something new, because of many people get fail to create digital cash.
After Satoshi see many fail in making digital cash system with central entity, then he ignore the central entity. This concept almost same with Peer-to-Peer network for file sharing.
This new concept that is made become a launch of cryptocurrency. Then the idea that is appear can be used to create the digital cash. The technical reason and complex is cryptocurrencies can make people work easy.
People need the payment network with bank account to use the digital cash, balance and transaction to use digital cash that they want. But, the problem is to prevent the double spending. It means prevent the same amount in second time that is arranged by central server which record the transaction.
Using decentralized network, we don’t need to have a server. So people need every network entity to do digital payment work. All transactions that occur need to be recorded to know the validity period and make a second purchase.
How can these network entities record all transactions?
All this work will be disrupted if there is no partner that runs balanced. This job requires all parts to work properly. If doing transaction service center will bring up the correct balance, but it is not likely to happen without central authority.
No one knows how digital cash works until Satoshi created the tool. Many people do not believe that it will work.
Satoshi had proved the machine was going well, and reached a consensus without central authority. This is a cryptocurrencies that made a great discovery and made it worldwide.
What exactly are cryptocurrencies?
If people forget all the long opinions about crypto and make it a simple definition, People will understand that in the database nothing can change without any specific requirements. One might think this is normal, but how one can determine the desired currency.
People taking money in bank accounts is something more than an entry in a database that can be changed under certain conditions, is it like that? Even people can take coins with certain criteria. It can be changed according to the command entered. Money in this case becomes some kind of account database, balances, and transactions.
How some miners can create coins and confirm transactions
The mechanism of how to set up database cryptocurrencies as well as Bitcoin which consists of peer network. Each network has a complete recording of all transactions that occur within each account’s balance.
A transaction is a file that reads, “Bob gave X Bitcoin to Alice” then was given Bob’s personal key. There is absolutely nothing special about this basic key. Once tagged, a transaction will be broadcast over the network, sent from one post to another. This is the basis of the p2p-technology system. There is nothing more to admire about this system.
All transactions will be propagated by the entire network after receiving confirmation.
Confirmation is the basic concept in crypto. One could say that crypto is related to confirmation. Before confirmed, the transaction can be forged. When you get a confirmation, the transaction can not be returned forcibly again, and will become part of the transaction history, also called blockchain.
Transactions can only be confirmed by miners. The transaction becomes the task of miners in the cryptocurrency network. The transactions are captured, confirmed in the network. Once the miner has confirmed the transaction, each transaction must be added to its database, and this database becomes part of blockchain.
The work of miners is given a reward in the form of a sign of kriptocurrenci, for example Bitcoins. Miner activity is the most important part of the cryptocurrency system, one should better understand and think about it.
What did the miners do?
Everyone can become a miner, because decentralized networks do not have the authority to delegate this task, a cryptocurrency requires a kind of mechanism to prevent one party from abusing it. Imagine someone creating thousands of co-workers and spreading fake transactions. The system will soon break.
Thus, the enactment of regulations made by Satoshi the miners need to invest some of their computer work to qualify for this task. They must find the hash – the product of the cryptographic function – which connects the new block with its predecessor. This is called Proof-of-Work. In Bitcoin, Proof-of-Work is based on the SHA 256 Hash algorithm.
People do not need to understand the details of SHA 256. It is important for community to know that it can be the basis of the cryptological puzzle that miners must solve. A miner can build blocks and add them to blockchain, because of the solution. As an incentive, he has the right to add the so-called coin transactions that give him some Bitcoin. This is the only way to create a valid Bitcoin.
To create Bitcoin, miners must be able to solve cryptographic puzzles. Because the puzzle is quite difficult to increase the amount of computer power that all miners have, there are only a number of specific cryptocurrency signs that can be made in a certain amount of time. This is part of the consensus that peers can not do in the network.
If people think that Bitcoin is a decentralized peer network that holds consensus about accounts and balances, Bitcoin is more a currency than the amount you see in your bank account. These numbers are more than entries in databases that can be changed by someone who can not be seen and unknown rules?
In its use, cryptocurrencies are entries about tokens in a decentralized consensus database. These entries are called CRYPTOcurrencies and the consensus process is maintained and secured by robust cryptography.
Cryptocurrencies are created on top of cryptography. Such cryptocurrencies are not guaranteed by people or by trust, but are safeguarded and secured by mathematics. The more rigorous and safer guarding may be interpreted as hoping the asteroid falls in your house rather than stealing the guarded and guaranteed bitcoin address.
Understand the crypto characteristics needed to separate between transactional and monetary properties. Meanwhile there are many shared cryptocurrencies with the same property tools and they are not carved with stones.
1.) Irreversible: After transaction confirmed we can’t change or reverse this transaction. Once again, no one can change or reverse transaction, so make sure you give valid information before send a transaction.
2.) Pseudonymous: On both of these transactions and accounts are not linked to real-world identity. People can receive Bitcoin at a randomly named address and appear to have a chain of about 30 characters. Addresses that are not related to reality are used to analyze the flow of transactions.
3.) Fast and global: Transaction will broadcast to network instantly and will be confirmed in few minutes. Due we have global network so transaction no need to know your location, whereever your location transaction will broadcast to global network although you send bitcoin to your neighbour.
4.) Secure: All cryptocurrency funds are stored and locked into public key cryptosystems. Someone who can send crypocurrensy is only the owner of the private key. Cryptography has a very complicated keyword in the form of numbers, making others impossible to solve this scheme. This Bitcoin address will be much safer than Fort Knox.
5.) Permissionless: You don‘t have to ask anybody to use cryptocurrency. It‘s just a software that everybody can download for free. After you installed it, you can receive and send Bitcoins or other cryptocurrencies. No one can prevent you. There is no gatekeeper.
1.) Controlled supply: Cryptocurrency typically creates a token supply limit. The token supply in Bitcoin decreases at any time and will reach the final limit of which occurs around the year 2140. The token inventory is controlled by crypto with the schedule listed in the number code, and in the future can be calculated today’s estimates. Nothing surprising from this explanation.
2.) No debt but bearer: Money-Fiat in everybody’s bank account is made with debt, and the amount can be seen in the ledger which is nothing but a book of debt. This book is included in the IOU system. Cryptocurrencies are by no means representative of debt. Cryptocurrencies represent only themselves. Cryptocurrencies are in the form of money like coins of gold.
People need to understand the existence of a crypto revolutionary that can be exploited from two traits. Both of these traits are Bitcoin, which functions as unauthorized and irreversible payments, and pseudonyms which are attacks for bank and government controls on public transactions. People cannot block others from using Bitcoin, accept payments, or cancel transactions.
As money with a limited, controlled supply that is not changeable by a government, a bank or any other central institution, cryptocurrencies attack the scope of the monetary policy. They take away the control central banks take on inflation or deflation by manipulating the monetary supply.
Cryptocurrencies is money with limited inventory. The government, bank or other central institution cannot change the inventory. Inflation or deflation controlled by central banks is taken over by cryptocurrencies with the manipulation of monetary supplies.
Cryptocurrencies: Dawn of a new economy
Because the mission is too big, Satoshi Nakamoto did not dare to continue. Its use does not include attracting consumers, Bitcoin attracts the public’s attention. It is more like religion than technology.
Cryptocurrencies are a secure digital gold system from political influence. This money serves to conserve and increase the value of the currency over time. This system can be used to carry out forbidden and illicit economic activities because it is worldwide and private, and has fast payment facilities.
Cryptocurrencies are widely used as a means of payment, speculative tools and storage of dwarf value aspects of payments, which make the market evolve and dynamic for investors and speculators, and allow trade with hundreds of cryptocurrencies. This makes the amount of daily trading of its users exceeds the major European stocks.
Alongside the Initial Coin Distribution (ICO) praxis, it provides a crowdfunding project facilitated by the Ethereum smart contract, often becoming a money-field. In the case of “DAO” is already more than 150 million dollars.
In this rich coin and token ecosystem, people are already experiencing extreme volatility. It is common that coins rise 10 percent per day – sometimes 100 percent – the same amount of reduction the next day. If lucky, the value of coins grows up to 1000 percent in a week or two.
Investors and users should keep an eye on some of the crypto that exists, because Bitcoin is the most famous crypt and most have zero non-speculative effects. Current crypto can be seen.
The first and most famous cryptocurrencies are Bitcoin, which functions as a digital gold standard, used as a means of global payments and is a currency of cyber crime such as black market or ransomware. After seven years of its existence, the price of Bitcoin increased from zero to over 650 US dollars, and the volume of transactions reached more than 200,000 daily transactions.
Cryptocurrencies thinker-young genius Vitalik Buterin has occupied the second position in the history of Cryptocurrensies. In addition to Bitcoin, its blockchain validates a set of accounts, balances, and state. Which means Ethereum besides processing transactions as well as complicated contracts and programs.
Ethereum is the perfect instrument for blockchain applications because of its flexibility, so the price tends to be more expensive. After the Hack of the DAO, the developers decided to do the system without consensus, which triggered the Ethereal Classic and some Ethereal clones. This makes Ethereum more a crypto family than a single currency.
Ripple is a less popular project in the Cryptocurrencies class. Though Ripple has an XRP network to process IOU. However, its currency can not be used as a store and exchange medium, just as a network protective token from spam.
XRP-tokens created by Ripple Labs, the company that runs the Ripple network, and are distributed by them at will.
However, the bank seems to like Ripple. At least they adopt a system with increasing speed.
Litecoin is one of the first cryptocurrencies after Bitcoin and is characterized as silver to the digital gold bitcoin. Faster than bitcoin, with token numbers and larger mining algorithms, Litecoin is a real innovation, perfectly tailored to be the little sister of bitcoin. “This facilitates the emergence of some crypts that use the codebase but make it even lighter”. Examples are Dogecoin or Feathercoin.
While Litecoin fails to find real use cases and loses second place after bitcoin, it is still actively developed and traded and stockpiled as backup if Bitcoin fails.
Monero is the most outstanding example of the cryptonite algorithm. This algorithm was created to add the missing Bitcoin privacy features. If you use Bitcoin, every transaction is documented in the blockchain and the transaction trail can be followed. With the introduction of a concept called ring-signatures, the cryptonite algorithm is capable of cutting the path.
The first application of cryptonite, Bytecoin, is very premise and rejected by society. Monero is the first non-premined imitation of bytecoin and raises a lot of awareness. There are several incarnations of cryptonote with little improvement of their own, but no one has ever achieved the same popularity as Monero.
Monero’s popularity peaked in the summer of 2016 when some darknetmarkets decided to accept it as currency. This resulted in a steady rise in prices, while the actual use of Monero remains disappointing.
In addition, there are hundreds of cryptoes in some families. Most of them are nothing more than trying to reach investors and quickly make money, but many promise a playground to test the innovation of cryptographic technology.
What is the future of Cryptocurrency?
The market of cryptocurrencies is fast and wild. Nearly every day new cryptocurrencies emerge, 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 bag holder loses hope ever to see a return on his investment.
Markets are dirty. But this doesn‘t change the fact that cryptocurrencies are here to stay – and here to change the world. This is already happening. People all over the world buy Bitcoin to protect themselves against the devaluation of their national currency. Mostly in Asia, a vivid market for Bitcoin remittance has emerged, and the Bitcoin using darknets of cybercrime are flourishing. More and more companies discover the power of Smart Contracts or token on Ethereum, the first real-world application of blockchain technologies emerge.
Revolution is already happening. Institutional investors started buying cryptocurrencies. Banks and governments are aware that this discovery has the potential to draw their control. Cryptocurrencies change the world. Step by step. You can stand aside and watch – or you can be part of history in the making.