What is Cryptocurrencies? - WORLDWIDE HOT NEWS

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Monday, February 19, 2018

What is Cryptocurrencies?


Today cryptocurrencies have become a global phenomenon known to most people. While still somehow geeky and not understood by most people, banks, governments and many companies are aware of its importance.

In 2016, you will have a hard time finding a major bank, a big accounting firm, a prominent software company or a government that did not research cryptocurrencies, publish a paper about it or start a so-called blockchain-project. “Virtual currencies, perhaps most notably Bitcoin, have captured the imagination of some, struck fear among others, and confused the heck out of the rest of us.” – Thomas Carper, US-Senator

What is cryptocurrency?

Few people know, but cryptocurrencies emerged as a side product of another invention. Satoshi Nakamoto, the unknown inventor of Bitcoin, the first and still most important cryptocurrency, never intended to invent a currency. In his announcement of Bitcoin in late 2008, Satoshi said he developed “A Peer-to-Peer Electronic Cash System.“ His goal was to invent something; many people failed to create before digital cash.

To realize digital cash you need a payment network with accounts, balances, and transaction. That‘s easy to understand. One major problem every payment network has to solve is to prevent the so-called double spending: to prevent that one entity spends the same amount twice. Usually, this is done by a central server who keeps record about the balances.

In a decentralized network, you don‘t have this server. So you need every single entity of the network to do this job. Every peer in the network needs to have a list with all transactions to check if future transactions are valid or an attempt to double spend.

But how can these entities keep a consensus about this records?

If the peers of the network disagree about only one single, minor balance, everything is broken. They need an absolute consensus. Usually, you take, again, a central authority to declare the correct state of balances. But how can you achieve consensus without a central authority?

Nobody did know until Satoshi emerged out of nowhere. In fact, nobody believed it was even possible.

Satoshi proved it was. His major innovation was to achieve consensus without a central authority. Cryptocurrencies are a part of this solution – the part that made the solution thrilling, fascinating and helped it to roll over the world.

For more information about cryptocurrencies, please check out on Coinmarkets.

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