AN INTRODUCTION TO THE BASIC UNDERSTANDING OF CRYPTOCURRENCY!!!
How it is popularly known in my country, Nigeria, that the river would never run dry if it knows its source of water. I took it dim to myself to understand what I need to know about cryptocurrency; if I really want to fully understand the steemit blockchain. In this article, I would share my research and what I have understood above cryptocurrency how it is been structured and it reasons.
I would love you all to watch my dtube video about this article.
First, the question that comes always towards the minds of newbees; who have no idea of the existence of cryptocurrency when they are introduced to any blockchain is always WHAT IS CRYPTOCURRENCY AND HOW DOES IT WORKS?
Secondly, we will also discuss on the qualities of cryptocurrency; which entails what and what should a cryptocurrency have and what it should not have
Lastly to that, I will discuss about the Origin of cryptocurrency.
NOW LET’S BEGIN!!!
1. WHAT IS CRYPTOCURRENCY?
Cryptocurrency to my understanding and to my definition is as follow:
Cryptocurrency is a decentralized digital exchange (DDE) medium that makes use of cryptography to engage in peer-to-peer transaction, that neither requires personal identities nor trusted third parties, which can easily be transacted all over the world.
This was the definition I came up with after my research on the understanding of cryptocurrency.
• HOW DOES CRYPTOCURRENCY WORKS?
Reference link
To explain the picture above: we can say a peer1 wants to make a transaction to peer2 which we call a peer to peer transaction. The request of the transaction to be made goes to the P2P network consisting of computers known as nodes validates the transaction and the user’s status known algorithms. A verified transaction can involve cryptocurrency, contracts, records, or other information. Once verified, the transaction is combined with other transaction to create a new block of data for the ledger. The new block then added to the existing blockchain in a way that is permanent and unalterable. Then the transaction is complete.
The process in which requested transactions are being validated by the network of nodes and combined with other transactions to form blocks is what I define as CRYPTOCURRENCY MINING
2. QUALITIES OF CRYPTOCURRENCY
From the definition of cryptocurrency given, we can attain some qualities in which a cryptocurrency should have. The qualities of a cryptocurrency are as follows:
• Decentralized: There is no central wallet or computer where all the cryptocurrencies are kept. So the currencies are not placed or kept at a central spot for distribution but are distributed to different computers.
• Digital: Cryptocurrencies are not concrete substances which can be held for physical exchange and are only found in computers.
• Cryptography: Cryptocurrencies are being encrypted to avoid information leaked to third parties. The process of encryption whereby meaningful text/information is converted to unintelligible test is called cryptography.
• Peer-to-peer transaction: Cryptocurrencies follows the end-to-end transaction in which trusted third parties are not allowed as a middle man transaction for transaction to be made. Transactions are always direct from pair-to-pair, and it does not require bank or PayPal to make a complete transaction.
• Highly Secure: Cryptocurrency must be highly secured, it should have both private and public key. The public key is just like the address to receive cryptocurrencies and the private key Is the lock code to allow sending of cryptocurrency to another address. So there should be private and public keys to ensure security of your coins.
• Pseudonymous: You don’t need to lay your personal information to have access cryptocurrency. So your transactions and accounts are not by any way connected to your personal identity. It mainly concerns your coin address to receive the amount of coin to be sent and no personal information is needed.
• Worldwide/global: Since cryptocurrencies are not concrete not fiat currencies owned by the government or any country, it can be easily be transacted at an instant anywhere in the globe.
ORIGIN OF CRYPTOCURRENCIES
In the earlier days, there were other forms digital cash before the era of cryptocurrencies such as Digicash, cybercash system and more others. These forms of digital cash were strictly decentralized in which they do not want the interaction between trusted third parties. They wanted to have more access over their money and lives. These forms of digital cash later ended of failing at a point before the era of cryptocurrency.
Later in the year 2009, the first cryptocurrency was introduced to the world “Bitcoin” and was created by a pseudonymous developer Satoshi Nakamato. The Bitcoin is the first fully decentralized digital cash system which has no controlling body or central governing.
The idea of the cryptocurrency created was to make a decentralized peer-to-peer network for easy transactions in which double spending cannot occur; double spending is the act in which the owner of a currency decides to spend the same amount twice. On a normal time, double spending is been prevented by a central body who keeps account each transaction made. And in a decentralized body, each peer needs to agree about each transaction balance so that the body would not require a centralized authority.
Satoshi Nakamato, therefore, created a system in which consensus be done where balances and transactions are been recorded, and if there is a disagreement between any peer about any single record, the whole system breaks down. This invention proved that the centralized body has no importance to the system in controlling account balances and transactions.
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In my next post, I will be taking about blockchain and cryptocurrency mining.
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