Learning About Crypto30th January 2019
From their humble beginnings, cryptocurrencies have become a global phenomenon known to hundreds of millions of people around the world. Despite this widespread recognition, the impression that it is for the technically advanced remains. This is a common misunderstanding, and learning about crypto is easy no matter how tech-savvy you are.
In recent years, prominent members of the banking, accounting, software, and government agencies have weighed in on cryptocurrency. Despite an initially negative reaction, regulatory bodies like the SEC and FCA have begun making headway in producing a legal framework for the cryptocurrency industry. Cryptocurrency and blockchain technology are globally insurgent, disrupting everything from supply chains to the wine industry.
The goal is mass adoption, and there has never been a better time to get involved than now!
What Are Cryptocurrencies?
The introduction to cryptocurrencies came in 2008 shortly after the financial crisis. The reason for the crash was mainly due to financial institutions involved in the mortgage scandal. A man now known as Satoshi Nakamoto created Bitcoin. To explain Bitcoin, Satoshi made a statement in 2009. In late 2009, Satoshi made a statement which said it was a “Peer-to-Peer Electronic Cash System.” Satoshi’s goal was to create new money which had never been done before and eliminated the power from the central banking systems.
“Announcing the first release of Bitcoin. A new electronic cash system that uses a peer-to-peer network to prevent double-spending.”
-Satoshi Nakamoto, 09 January 2009, announcing Bitcoin on SourceForge.
Satoshi‘s invention was unique; he had found a way to create a decentralised digital currency. In the nineties, there had been many attempts to create digital money, but all had failed or fizzled out. After seeing centralised attempts fail, Satoshi tried to build a digital cash system without a central entity, much like a Peer-to-Peer file sharing network. From this effort arose Bitcoin, and eventually other, competing networks and currencies.
This is where it gets a bit more complicated. In a decentralised network, you do not have a single centralised server. Every peer (or node) in the record of chronologically linked transactions (called the blockchain) needs to have a list of all transactions to check if future purchases are valid or an attempt to double spend. When someone makes a transaction, it is broadcast to the entire network. Each of these nodes will then run a complex algorithm designed to ensure validity. If the transaction is valid, they add it to the blockchain.
This method represents a significant increase in security compared to traditional databases. The higher the number of nodes in a network, the more computers a potential attacker would need to compromise the database. Attacking and altering the blockchain copy on one (or anything less than 51% of the nodes in the network) would simply result in the minority consensus being ignored.
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