The emergence of cryptocurrency is already gaining ground in our daily transactions. Cryptocurrency is a digital asset that exists in the world of cryptography and many refer to it as “digital gold”. But what is cryptocurrency really? You have to ask yourself that.
It is a digital asset intended to be used as a means of exchange. Clearly, this is a close substitute for money. However, it uses strong cryptography to secure financial transactions, verify asset transfers, and control the creation of additional units. Every cryptocurrency is a virtual currency, digital currency or alternative currency. It is imperative to note that all cryptocurrencies use a decentralized control system over the centralized systems of banks and other financial institutions. These decentralized systems operate through distributed book technology that serves a public financial database. A blockchain is usually used.
What is a blockchain?
It is a list of ever-growing records that are linked and protected by cryptography. This list is called blocks. A blockchain is a distributed, open ledger that can be used to record transactions between two parties in a verifiable and permanent manner. To allow a blog to be used as a distributed ledger, it is managed by a peer-to-peer network that collectively adheres to a new block validation protocol. Once the data has been recorded in any book, they cannot be modified without altering the other blocks. Therefore, blockchains are secure by design and also act as an example of a distributed computer system.
The history of cryptography
David Chaum, an American cryptographer, discovered an anonymous cryptocurrency called ecash. This happened in 1983. In 1995, David implemented it through Digicash. Digicash was an early form of cryptographic electronic payment that required user software to withdraw banknotes from a bank. It also allowed you to designate specific encrypted keys before sending them to a recipient. This property allowed the government, the issuing bank or any third party to be unable to locate the digital currency.
After increasing the efforts of the following years, Bitcoin was created in 2009. This was the first decentralized cryptocurrency and was created by Satoshi Nakamoto, a pseudonymous developer. Bitcoin used SHA-256 as a cryptographic hash function (working test scheme). Following the launch of bitcoin, the following cryptocurrencies were also launched.
1. Namecoin (April 2011)
2. Litecoin (October 2011)
These three coins and many others are known as altcoins. The term is used to refer to alternative variants of bitcoin or simply other cryptocurrencies.
It is also essential to keep in mind that cryptocurrencies are exchanged over the Internet. This means that its use is mainly outside the banking systems and other government institutions. Cryptocurrency exchanges include the exchange of cryptocurrencies with other assets or with other digital currencies. Conventional fiat money is an example of an asset that can be traded with cryptocurrency.
They refer to a proposed mechanism by which a cryptocurrency can be exchanged directly from another cryptocurrency. This means that, with atomic exchanges, the participation of third parties in the exchange would not be necessary.