Well, you have heard this word million times in recent days. Maybe The most buzzword of the 21st century is Cryptocurrency. After hearing this magical world, you have tons of queries.
This article explains the most important thing about Cryptocurrencies. After reading this most of your queries will be clear and you will know more about it than others. So let’s analyze this.
History of Cryptocurrency
There have been many attempts for creating a digital currency, the substitute for traditional bank currency during the 90s by tech geeks. They failed very badly for the regions like fraud people, financial problems, etc. Those digital currencies used a Third-party company to verify the transaction.
Because of these reasons the feature of creating digital currency hanging in the air.
In early 2009, an anonymous programmer or a group of the program named Satoshi Nakamoto introduced Bitcoin. It is still a mystery who is the real Satoshi Nakamoto. Many people claimed himself Satoshi Nakamoto but they failed to prove it.
To say frankly Satoshi Nakamoto never intended to invent a currency. In his announcement of Bitcoin in 2008, Satoshi Nakamoto said he developed “A Peer-to-Peer Electronic Cash System”.
Satoshi’s actual intention was to provide a payment system that would allow individuals to send and receive payments without involving any third-party (mediator) financial institutions. It is a so-called decentralized Cryptocurrency.
This decision of Satoshi Nakamoto was the actual birth of Cryptocurrency. Finally, you got a crystal clear idea about the origin of Cryptocurrency. Fine, let’s move.
What is Cryptocurrency
A cryptocurrency is a digital currency designed to work as a medium of exchange. It uses a process called cryptography to secure and authenticate its transaction, to control the creation of a new unit of a Cryptocurrency.
Ok, you may have a doubt with the word cryptography. So let’s know it first then move further.
Cryptography is a process to convert highly sensitive data into an encrypted format. Hence the data is secure and secret. This encrypted data can’t be read without a key to decrypt it. The main intention behind the cryptography technic in Cryptocurrency is to provide the highest level of security. There is no change of fraud in this process.
Well, to circulate digital cash in the market you need a payment network with accounts, balances, and transactions. But Double spending is like a nightmare in every payment network. The central server keeps the record of all the transactions to overcome one entity spends the same amount twice.
But in a decentralized network, there is no central server to keep all the records of the transactions. Every single entity of the network to do this job. This maintains through Blockchain.
Another confusing word is Blockchain, what is it?
Simple, A Blockchain is a public ledger of all cryptocurrency transactions. The continuously growing list of records is called blocks. As soon as the transaction is completed it is added in chronological order. In this way, market participants can track all the transactions without any central server. Each and every node means a computer connected to the network gets the copy of the blockchain and it is downloaded automatically.
Every transaction in the cryptocurrency network is a file consisting of the sender and receiver public key and the amount of coin transferred. Now the transaction is live on the network and needs to confirm as soon as possible.
In a cryptocurrency network, the only miner has the ability to confirm the transactions. Miners are the heart of the network.
If you are thinking about mine cryptocurrency it is more difficult than before. Because it is getting more popular day after day and more miner is joining every day. The transaction can verify after solving complicated cryptographic puzzles. The difficulty of the puzzles is constantly increasing because more miners trying to solve it.
To step foot in the world of cryptocurrency mining you need to invest some money. You may like to mine Bitcoin the most successful cryptocurrency ever.
Equipment need to mine Cryptocurrency
There are various ways to mine cryptocurrency. If you want to mine cryptocurrency yourself you required the following things.
Mining hardware – You will need a specially designed ASIC chip for your computer to mine cryptocurrency.
There are some important factors to keep in mind when determining which cryptocurrency mining ASIC to buy:
Hash rate – The hash rate is the measuring unit of the processing power of the Bitcoin network. How many hashes per second can the Bitcoin miner make? More hashes cost you more.
Efficiency – The process of Bitcoin mining consumes a huge amount of electricity. So when choosing the hardware keep in mind the efficiency of that ASCI.
Price – Cheap mining hardware will mine fewer bitcoins, less efficiency, and consume less electricity usage. The fastest and more efficient mining hardware is going to cost more and consume more electricity. So choose it wisely.
Mining software – mining software is needed for the ASIC hardware to engage in mining work, and receive the completed work ledger from other miners on the network.
The mining software will monitor the input and output of your system and also display statistics such as the speed of your miner, GPU use, fan speed, hash rate, and the temperature.
Cryptocurrency wallet – every cryptocurrency associated with a private key. When you buy or receive it from someone, it comes with a digital private key i.e. the full address of the currency. You can use this private key to access and validate or approve transactions.
Place the private key safely. If the private key is missed you can’t get your cryptocurrency back. At this point in time cryptocurrency wallet comes into play.
There are a variety of cryptocurrency wallets are available in market
Types of Cryptocurrency wallet
Online wallets –
Online wallets are generally assigned through the web browser.
Pros – It is the fastest way to complete a transaction. It is ideal for holding a small amount of cryptocurrency.
Cons – Third-party servers stores your wallet and you have no control of its security. Fear of hacking is more.
Mobile wallets –
This is the most portable cryptocurrency. Mobile wallets provide access to your cryptocurrency
Pros – Easier to use than other wallets and operate it on the go.
Cons – if your phone is formatted rooted the wallet will go.
Desktop wallets –
A desktop wallet is more secure than both an online wallet and a mobile wallet. If your online security is good it is a more secure way to store the wallet.
Pros – it’s very easy to use and third-party servers don’t store your private key.
Cons – if your OS is corrupted and you forget to back up your wallet will be lost.
Hardware wallets –
You can use a USB device specifically designed to store bitcoin electronically and your private address keys.
Pros – it has stronger security because it is not connecting to the internet directly.
Cons – it is a little bit difficult to use this for beginners.
Paper wallets –
Some websites offer paper wallets. The paper contains two QR codes in it. One for a public address to receive cryptocurrency, and the other for a private address.
Pros – The most hacker-proof cryptocurrency wallet and third-party servers don’t store the private key.
Cons – You have to be more technical knowledge to use this.
Finally, no wallet is superior to others, choose as per your requirement.
Examples of famous cryptocurrencies
The number of cryptocurrencies available over the internet is over 1372(as of 31 December 2017) and keeps growing. I am going to discuss some of the most famous of them.
Bitcoin is the first and most famous cryptocurrency. It is treated as the king of all cryptocurrencies. After the invention, the value is consistently increasing day by day.
Ethereum is an open-source software based on blockchain technology. It allows developers to develop and deploy decentralized applications. It is also a trending cryptocurrency.
Ripple was created in 2012. It is a payment network as well as a cryptocurrency. The payment network of Ripple is called “Ripple Network” and the cryptocurrency is called “Ripple XRP”. A decentralized XRP ledger keeps all the transactions of Ripple.
Litecoin is one of the first cryptocurrencies after the innovation of Bitcoin. It was released in 2011. Litecoin is faster than Bitcoin. It uses the scrypt algorithm in its transaction.
Monero was created in 2014. It follows a new algorithm called CryptoNight. In this cryptocurrency, Anyone can’t follow the transactions.
Advantages of using cryptocurrencies
There are some advantages to using cryptocurrencies
The transactions are very fast
Low transaction fees
Complete control over your currency
Drawbacks of cryptocurrencies
Having some advantages there are also some disadvantages.
Lack of general awareness
Its volatile nature
Misuse of cryptocurrencies by criminals and hackers
Ah, after a long journey we finally reach hear.
Many countries have given green light for Cryptocurrencies and many have to give yet. Cryptocurrencies are guiding us in a new way of the currency system. It does so without any centralized bank or financial institution. This technology is new and has a long way to go. May this transaction system is the feature of the economy.