Quick Overview on ‘What is Cryptocurrency’?
So what is a cryptocurrency?
Cryptocurrency or otherwise known as the digital currency is an alternative to the real world currency like dollar or euro.
First introduced in 2007, the cryptocurrency has no hard existence, it only exists in the virtual network. The total system of the cryptocurrency is based on the protocols of cryptography which functions through mathematical procedures. A specific set of algorithms is designed to run a specific cryptographic platform and cryptocurrency acts as the tokens of that platform. Since the total system is based on computerized programs, it is free from any human regulation.
Bitcoin was the first cryptocurrency introduced in the system. The bitcoin system is based on a peer-to-peer cryptographic platform called the Blockchain (following a great video explanation by Anders Brownworth about blockchain on YouTube)
res Brow. In this system, blockchain acts as the data holding platform and bitcoin is the value transaction unit or in simple terms, the currency.
The cryptographic peer-to-peer sharing system allows for the documentation of any transactions occurring in the system if someone registered in the system sends bitcoin to another registered entity of the system, the data of the transaction is stored in the blockchain.
The protocols of the blockchain don’t allow any double entry of the same data. As a result, there is no chance of sending the same bitcoin to the same person twice, even without the help of any regulatory third party.
How does it work?
Every bitcoin transaction made between any of the registered entity of the system is recorded in the blockchain. The data is both transparent and encrypted at the same time. So, there are no chances of someone corrupting any transaction data. Every registered user in the system can monitor any transaction data at any time and from anywhere. It is the public ledger of the 21st-century technology that is free from any regulatory involvement.
There are no central authorities or third party authorization. Every user of the system holds the freedom of their own accounts.
The cryptocurrency network is operated by miners or programmers. They dedicate their computing power and solve mathematical problems to process the data into blocks, the functional unit of the blockchain. As a reward for their work, they are given bitcoins. This is the proof of work system that keeps the network safe and distributes the bitcoins among the network.
Over the years, several cryptocurrencies have been introduced as an alternative to bitcoin, all with a sole purpose of filling up the flaws of bitcoin. Different cryptocurrency operated on different blockchain network but their fundamental properties are same. Such as,
- Any cryptocurrency transaction is encrypted on the network, so they are not reversible once a transaction has been processed, there is no way of retrieving that transaction.
- One of the main features of the cryptocurrency is that they are anonymous. The user doesn’t need to provide with their personal information to get registered in the network. Every registered user in the system is represented by a private key which is used to represent the transactions of that account. So the identity of the user remains safe and secure.
- Transactions are made within seconds of the cryptographic network. There is no need of any third party verification or paperwork like in the traditional money transaction system such as MasterCard or Visa. There are no regulatory steps for cross-border transactions. So you can send cryptocurrency to any part of the world in a flash and with a little amount of cost.
The true purpose of the introduction of cryptocurrency was to provide an alternative to the traditional fiat currency system. The idea was to build a financial system that is free from any national borders and regulatory authorities.
Hence, providing people with true freedom of money.