EVERYTHING YOU NEED TO KNOW ABOUT CRYPTOCURRENCIES
A lot of people do not understand the concept behind cryptocurrencies even with all the press awareness. This article will give an understanding of the basic concepts of cryptocurrencies.
A brief history
Cryptocurrencies came about as a result of the development and the introduction of Bitcoin currency. Bitcoin was developed by Satoshi Nakamoto around late 2008. Satoshi had no intention of making bitcoin a currency. According to him, it was meant to be a “peer to peer electronic cash system” to avoid the issue of double spending. Satoshi Nakamoto announced sometime in January 2009 on SourceForge that the Bitcoin system has no central authority or server. Satoshi was able to invent a digital cash system that was not centralized which many developers had failed to create over the years with several attempts.
Satoshi’s invention of a non-centralized digital cash system brought about the creation of cryptocurrencies. To utilize the digital cash, one needs to have created a payment network which will have information like a working bank account. It would have balances and transaction records. The major challenge with the payment system was having to prevent double spending where a person would end up spending for the same transaction twice. In regular payment systems they have a central server that is responsible for storing records on balances in the account but in a network which isn’t central, you can’t find any central server.
What then happens is that one single entity in the network will perform the task. The peer to peer network server makes it possible where each individual network will compile a list containing all transactions and monitor future transactions which are valid to avoid the issue of double spending.
The phenomenon called cryptocurrency
Cryptocurrency works easily and operates like a bank account. It is just like taking cash and depositing into your account. Like regular bank accounts which involve making entries in a public database showing recent transactions and account balances, cryptocurrencies operate the same way. Cryptocurrencies have a lot of value in the market today, they can be more or less described as digital gold and it is safe and secure. Its value increases over time and it is used all over the world for payment. For instance, as at date Bitcoin value has risen over $5,000. Ethereum price goes for about $307 which is also on the high side. It is also very private and can be used to pay for black market transactions and other very secret activities.
Types of cryptocurrencies:
Bitcoin is still the most commonly used cryptocurrency. Let us also take a look at the other types of cryptocurrencies that are also popular today and which investors should also focus on.
It is the first cryptocurrency which was introduced and the most popular of all cryptocurrencies. It is a digital gold payment system used all over the world. People have used Bitcoin for their transactions for over seven years and it will still continues to be in existence. The Bitcoin price increases daily and has increased from $0 to over $5,000 today in the currency exchange market. The Bitcoin value will continue to rise as it is the most commonly used currency for global transactions.
Vitalik Burterin is the brain behind the Ethereum. This cryptocurrency comes in second of all the other types of digital currencies. Ethereum processes general account transactions as well as very complex programs and contracts. This digital currency is very flexible and it makes it the best tool for blockchain applications. Despite this, Ethereum price does not still compare with the increased value of Bitcoin price. Ethereum price goes for about $307 currently, which is a lot less than Bitcoin. Developers of Ethereum did a hard fork as a result of the DAO hack (one of Ethereum’s smart contract) and created the Ethereum classic. Ethereum has other clones and the currency itself has tokens such as Argur and DigixDAO. It is a digital currency that has several other currencies within a set.
The company Ripple Labs invented the Ripple cryptocurrency. It isn’t as popular as the others and is usually represented with the symbol XRP. It is usually used as a network for processing IOUs other than as a currency itself. It doesn’t really have an exchange value but acts as a token for the protection of system networks from spam. XRP is referred to as pre-mined and isn’t regarded as a cryptocurrency because Ripple Labs distributes it on will. It doesn’t have any real value in the market. It is mostly used by banks.
Litecoin came shortly after Bitcoin and is usually tagged as a digital silver currency. It has a lot more tokens than the Bitcoin and it is faster. It was invented to follow suit with the Bitcoin and has a newer mining algorithm. It was the Litecoin that led to the inventions of other cryptocurrencies like Dogecoin. Although its value isn’t as high as Bitcoin, it is still usually traded and people use it as a backup in case the Bitcoin doesn’t work out.
This currency is quite new as it sprung in summer 2016 after it was accepted as currency by some darknet markets. The value has been increasing with time but people don’t still use it as much. It is a kryptonite algorithm which includes privacy features. The kryptonite algorithm feature of this currency makes it easy for hiding transactions as it cannot be traced because it is developed with a concept known as ring-signatures. The cryptocurrency community rejected the initial pre-mined Bytecoin before Monero was invented. Monero is the clone of Bytecoin. The difference is that Monero isn’t pre-mined.
Apart from the cryptocurrencies mentioned above, there are over hundreds of digital currencies falling in different families. Many of them cannot be compared to Bitcoin price but are just strategies to get investors to make more money.