The emergence of cryptocurrency is already taking its toll on our daily transactions. Cryptocurrency is a digital asset that exists in the world of cryptography, which many refer to as “digital gold”. But what exactly is cryptocurrency? You are wondering.
It is a digital asset designed to be used as a medium of exchange. Clearly, this is a close alternative to money. However, it uses strong cryptography to secure financial transactions, verify asset transfers, and monitor the creation of additional units. All cryptocurrencies are virtual currency, digital currency or alternative currency. It is essential that all cryptocurrencies use a decentralized control system compared to the centralized systems of banks and other financial institutions. These decentralized systems operate through a distributed ledger technology that will serve as a public financial database. Typically, a blockchain is used.
What is a blockchain?
This is a list of ever-growing records that are linked and protected by cryptography. This list is called a block. The blockchain is an open and distributed book, just as verifiable and durable as it can be used to record transactions between two parties. To enable a block to be used as a distributed workbook, it is managed by a peer-to-peer network that adheres to a new block validation protocol. Once the data has been collected in any book, it cannot be changed without changing all the other blocks. Therefore, blockchains are secure by design and also act as an example of a distributed computer system.
History of cryptography
David Chaum, an American cryptographer, found an anonymous cryptocurrency called ecash. This happened in 1983. In 1995, David established it through Digicash. Digicash was the first form of cryptographic electronic payment to extract notes from a bank that required user software. It also allowed you to name specific encrypted keys before sending them to a recipient. This property has allowed the digital currency to be found by the government, issuing banks or third parties.
After more effort in the following years, Bitcoin was created in 2009. This was the first decentralized cryptocurrency and was created by Satoshi Nakamoto, a nickname developer. Bitcoin used SHA-256 as a cryptographic hash function (proof of work scheme). Since the release of Bitcoin, the following cryptocurrencies have also been released.
1. Namecoin (April 2011)
2. Litecoin (October 2011)
3. Peercoin
These three coins and many others are called altcoins. The term is used to refer to alternative variants of bitcoin or other cryptocurrencies.
It is important to note that cryptocurrencies are exchanged over the Internet. This means that their use is primarily outside of banking systems and other government institutions. Cryptocurrency exchange involves the exchange of other assets or other digital currencies. Ordinary fiat money is an example of an asset that can be traded in cryptocurrency.
Atomic exchanges
These refer to a proposed mechanism by which one cryptocurrency can be exchanged directly from another cryptocurrency. This means that with atomic exchanges there would be no third party involvement in the exchange.