Cryptocrrency is an internet-based exchange medium which uses cryptographical functions to conduct financial transaction. Further, it refers as digital or virtual currency and it secured by cryptography, which secure from counterfeit or double-spend. Cryptocurrencies leverage blockchain technology to gain decentralization, immutability and transparency. Thus, feature of cryptocurrencies are that they are generally not issued by any central authority as well as rendering them theoretically immune to government interference or manipulation.
It is a form of digital asset based on network that is distributed across a large number of computers. Most important feature of a cryptocurrency is that it is not controlled by any government or central authority.
Cryptocurrency consists of four major innovations to make unique powerful combination such as
- De-centralized peer to peer network
- A public transaction ledger
- A de-centralized mathematical and deterministic currency issuance (distributed mining)
- De-centralized transaction verification system
History of Cryptocurrency
The emergence of successful digital currency is closely linked to developments in cryptography. This is not surprising when one considers the fundamental challenges involved with using bits to represent value that can be exchanged for goods and services. However, there are two main fundamental questions for anyone accepting the digital currency such as.
1.Can I trust the money is authentic and not counterfeit?
2.Can I be sure that no one else can claim that this money belongs to them and not me? (Also known as the “double-spend” problem)
Issuers of paper money are battling the counterfeiting problem by using increasingly sophisticated papers and printing technology. Thus, Physical money facing double-spend issue easily because same paper cannot be in two places at once.
When cryptography started to becoming available and understandable in the late 1980s, many researchers try to use cryptography to build the digital currency. These projects issued digital money, usually backed by a national currency or precious metal such as gold.
When these earlier digital currencies worked, they were centralized and result was they were easy to attack by government and hackers. In early digital currencies used a central clearinghouse to settle all transactions at regular interval, like a traditional banking system. Unfortunately, these digital currencies were targeted by worried governments and eventually litigated of existence. Some failed in spectacular crashes when the parent company liquidated suddenly. After that, Bitcoin was invented in 2008. It was the first blockchain-based cryptocurrency.
History of Bitcoin
The Bitcoin was invented by Satoshi Nakamoto. With the publication of a paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System”. Satoshi Nakamoto combined several prior inventions such as b-money and HashCash to create a completely de-centralized electronic cash system that does not rely on a central authority for currency issuance or settlement and validation of transactions. The key innovation was to use a distributed computation system (called a “Proof-Of-Work” algorithm) to conduct a global “election”.
Bitcoin network started in 2009, based on the reference implementation published by Nakamoto and since revised by many other programmers. Bitcoin’s security and resilience are provided by the distributed computer system. Satoshi Nakamoto withdrew from the public in April 2011, and leave the responsibility of developing code and network to a group of volunteers. The name Satoshi Nakamoto is an alias and the identity of the person or people behind this invention of currently unknown. However, anyone control over Bitcoin system, which operates based on fully transparent mathematical principles. The invention itself is groundbreaking and has already spawned new science in the fields of distributed computing, economics and econometrics.
What is Blockchain?
As we think blockchain is not that much complicate. Block-chain refers it as Block means digital information “chain” refers that stored in a public database. Thus, Block on the blockchain are made up of pieces of digital information and they have three parts such as
- Blocks store information about transaction like date, time and amount of your recent purchase.
- Participation details of the transaction
- Blocks store information that distinguishes them from other blocks.
Transaction is known immediately by the whole network. But only after a specific amount of time its gets confirmed. Thus, getting conformation is the critical part of the crytocurrencies. If the transaction is not confirm, it is pending can be forged. If the transaction is confirmed, it is set in stone. It is no longer forgeable. It can’t be reversed; it is a part of an immutable record of historical transaction called blockchain. Only miners can confirm the transaction.
What is Cryptocurrency Mining?
Mining is the process by which new Bitcoin is added to the money supply. Thus, mining also serves to secure system against fraudulent transaction or transactions spending the same amount of Bitcoin more than once, known as double spend. Thus, anyone can be a miner. Since a decentralized network has no authority to delegate this task, so need some mechanism to prevent one ruling party prevent from abusing it. Therefore, Satoshi set some requirements that miners should to invest some work of their computers to qualify for this task. Mining is performed by high powered computers that solve complex computational math problems. After find the solution, a miner a can build the block and add it to the blockchain. As an incentive he has the right to add a so-called coinbase transaction that gives him a specific number of Bitcoin. This is the only way to create the valid Bitcoin.
It is the first and most famous cryptocurrency. Bitcoin used as a digital gold standard in whole cryptocurrency-industry, in early it was used for de-facto currency of cyber-crime like dark markets or ransomeware. After seven years of existence, Bitcoin price increased from zero to more than 650USD and transaction reached more than 200,000 daily transactions. Right now it reached to 317, 597 daily transactions.
- Current Market capitalization: 131 Billion USD
- Share Price: 7250USD
- Stock Symbol: BTC
Ethereum is the second largest cryptocurrency in the World. It was invented by Vitalik Buterin. Further, validity of each ethereum is provided by a blockchain and unlike Bitcoin, ethereum operates using accounts and balances in a manner called state transitions. Further, Ethereum is not just a platform but also a programming language running on blockchain and helping developers to build and publish distributed applications.
- Current Market capitalization: 16 Billion USD
- Share Price: 147USD
- Stock Symbol: ETH
This is the third largest cryptocurrency by following Bitcoin and Ethereum. It is act as cryptocurrency as well as a digital payment network for financial transactions. Ripple was co-founded by Chris Larsen and Jed McCaleb, It was released in 2012.
Ripple is more known for its digital payment protocol than its cryptocurrency, it operates on an open source and peer to peer decentralized platform that allows for transfer of money in any form. Ripple, Unlike Bitcoin and Ethereum, has no mining since all the coins are already pre-mined. Lots of banks joined the Ripple network as it has found immense value in the financial space.
- Current Market capitalization: 9.5Billion USD
- Share Price: 0.219029USD
- Stock Symbol: XRP
Tether is a blockchain based cryptocurrency and it is a fourth largest cryptocurrency by market capitalization. Thus, aim of Tether is keep cryptocurrency valuations stable. Further it offers the transparency and minimal transaction charges to users. According to The Wall Street Journal, 80% of all bitcoin trading is done in Tether, and the stablecoin is a major source of liquidity for the cryptocurrency market.
- Current Market capitalization: 4 Billion USD
- Share Price: 0.997288USD
- Stock Symbol: USDT