So what is this new term that is on our TV screens always when talking about business news?
Many people are still struggling to comprehend what this Cryptocurrency is all about. Since October started, Stellar and other crypto-predictions are blooming everywhere. So what is it? It is a digital currency that uses Cryptography to ensure its transactions are safe. These transactions are done online hence it operates on a public database for its distribution.
Its digital public ledger, keep track of all transactions called Blockchain which uses a digital signature. These signatures are encrypted by a piece of data called Cryptography which acts as a proof that the transaction actually came from the owner of the wallet.
There are different types of Cryptocurrencies namely:
The most popular being Bitcoin which is a peer to peer digital money.
Who came up with this Bitcoin idea?
Bitcoin software is believed to have been created in 2009 by Satoshi Nakamoto. Information about his real identity still remains scarce. Bitcoin was first traded in 2010 by someone who exchanged some Bitcoins for two pizzas.
The idea behind Bitcoin was to address the shortcomings of the current payment systems globally. It was actually the first decentralized digital currency since there is no central bank involved.
This Bitcoin can be exchanged for other currencies or even products and services.
How Does this Cryptocurrency Work?
It works just like PayPal or a debit card. For you to use Cryptocurrency, you need to set up a Coinbase account where you can transact and store these Bitcoins. The transactions are done from peer to peer in a network from the Cryptocurrency wallet. This is what happens during the transaction:
- Someone requests for a transaction, and then the request is sent over the entire network.
- The transactions are collected into blocks by the computers in the network.
- The blocks of transactions are added to a public ledger where some complex computational puzzle is solved.
- When the computer finds the solution to the puzzle, it is broadcasted to the entire network.
- The computers in the network checks the solution from the puzzle solved against the transactions in the blocks, so as to avoid double spending.
- Finally the block is added to the chains to show that the transaction is complete.
- Cryptocurrency is a digital currency that is decentralized.
- Transactions are done from peer to peer in the network.
- Each transaction uses a digital signature.
- Blockchain is a digital public ledger where transaction records are kept.
- Block is added to the chains to show that the transaction is complete.
Also published on Medium.