Everything you need to know about cryptocurrencies at the beginning of the street

So far you have certainly heard of cryptocurrencies. But what are they actually, how can you use them and how are they different from the money we used to? Well, we must start with the origin of cryptocurrencies. They appeared in 2008, made by Satoshi Nakamoto, an unknown official author of Bitcoin.

Nakamoto did not intend to create a virtual currency, but simply an electronic system to transmit money from one point to another or by one person, without the need for banks or other money transmission systems. However, he managed to reach what many have failed, a cryptocurrency!

1. What are cryptocurrencies?

Cryptocurrencies are actually virtual money. They can be kept in virtual wallets and can be used for transactions, but they can also be changed with other cryptocurrencies or even classic money. Nowadays, there are many cryptocurrencies, with the best known, such as Bitcoin, Ethereum or Ripple, at least known.

But things have not always been like this. The first cryptocurrency was Bitcoin and wanted to act as a virtual exchange currency for goods or services. The first transaction with cryptocurrencies, more precisely with Bitcoin, was made in 2010. So 10,000 bitcoins were used for 2 pizza. The funny aspect is that, nowadays, 1 bitcoin is worth about $ 6,000! And to its peak, Bitcoin reached around $ 20,000 in December 2017.

From the first transaction to date, the value of cryptocurrencies has increased hundreds of thousands of times, and not only has not only been achieved by other cryptocurrencies, but the virtual market has increased so much that companies and even governments have effective in them.

For classic money, the tax authorities of each state, but also the international ones, ensure the number of pieces (banknotes, coins) that circulate on the market, but also their safety, fighting against the falsification of money.

The cryptocurrencies are exchanged by a virtual point system, without going through a tax authority of any kind. Therefore, they circulate in a decentralized system. The number of cryptocurrencies on the market is not controlled at a certain point, but in all points of the system, at the same time. Exactly as the central bank of the state controls the number of money, the units of a cryptocurrency are controlled by each miner who produces this currency.

Each miner who produces a type of cryptocurrency has a list of all transactions made with that currency, validating them in this way. The creation of «false» virtual currencies is extremely unlikely because it would require considerable calculation power, at least 50% higher than that of the entire network, to be concentrated at some point.

2. What is a miner?

A miner is a computer (or a calculation unit) that calculates and validates the algorithm that is the basis of a cryptocurrency, keeps track of all transactions and is rewarded for this with a quantity of the respective cryptocurrency.

For example, suppose that Ion sends a number of bitcoins to Maria. This transaction brings the unique encryption of ions and is public to all the miners of the network. This transaction is therefore automatically transmitted to each miner on the network, almost instantly. After confirmation of the transaction, it becomes irreversible and entered the stories of transactions, blockchain calls. Only network miners can confirm a transaction.

More simply, cryptocurrencies are limited items in a database that nobody can change compared to specific conditions. We must also mention that there is a limited number of each cryptocurrency, which is decided by the software developer.

Compared to classic money, cryptocurrencies are divided to the eighth decimal, which means that you can have cryptocurrency fractions, with which it is possible to perform transactions.

3. How do you get cryptocurrency?

Anyone can be a miner. Since it is a decentralized network, there is no authority to decide this and cryptocurrencies need a system that prevents a single entity from controlling the network. Therefore, Nakamoto has imposed the rule that miners must invest their computers to qualify for this task. In fact, they must find a hash – a product of a cryptographic function.

A cryptocurrency can only be created if miners solve a cryptographic puzzle. Since the difficulty of this puzzle increases the amount of energy of the computer that the miner invests, there is only a certain amount of cryptocurrencies that can be created in a certain period of time. This is part of the consent that no miner can stop.

On the other hand, you can buy cryptocurrencies with classic money, if you don’t want to extract!

4. The benefits of cryptocurrencies

Global speed: transactions are almost instantly propagated on the network and are confirmed in a few minutes. Since it happens in a global computer network, they are completely indifferent to your physical position, it doesn’t matter if you send Bitcoin to the neighbor or someone on the other side of the world.

Safety: cryptocurrency funds are blocked in a encryption system with public keys. Only the owner of the private key can send cryptocurrencies. The strong encryption and the large number of miners they have to validate make it impossible to break this scheme.

Freedom: You shouldn’t ask anyone to use cryptocurrencies. It’s just a software that everyone can download for free. Once installed, you can receive and send cryptocurrencies.