To understand what a cryptocurrency is you first have to understand what a Bitcoin is. Bitcoin has been around since 2009 and is a worldwide payment system. Recently in 2017 bitcoin has come to the publics attention because of the cost. Bitcoin has risen from $350+ in January, up to an all time high of $19,000+ in December.
Bitcoin started off and came to power when a programmer called Satoshi Nakamoto created a system where you could transfer information or currency, peer to peer without a middleman or bank through an online public ledger called the blockchain. Bitcoin is a reward which you can get from computer processing power by using a free program which can be downloaded from the internet. This is done for record-keeping on the network.
Bitcoins can be exchanged for other currencies, products and services. This is the reason cryptocurrencies where created. Shortly after Bitcoin was created, other people saw what could be done with the system and created their own alternatives like Ethereum, Litecoin, Ripple etc. Now there are hundreds of different cryptocurrencies and all new ones can be found on CoinMarketCap.com.
These can all a bit different than Bitcoin, and some can use “Smart Contracts” where you can change little details when transferring or receiving currency like Ethereum, where you can decide for example to send a certain amount of Ethereum when a required percentage of people agree on the transaction or to store information about an application, such as domain registration information or membership records.
People often think of Bitcoin as only virtual money or an online transaction system. It not only does these things but it also can be used for a multitude of other applications which money is only one.
We use money for trade and through the ages money has become more and more complex. As a civilisation, we all use money to exchange goods, services or other items of value with each other. Most trade is recorded and is done by book-keeping behind closed doors from the public. This is done by using middlemen like, banks, notaries, accountants, governments, intermediaries and organisations that we trust to approve any transactions of importance.
Having these trusted third parties do this for us can demand high fees.
This is where Bitcoin and Cryptocurrencies come in to play.
The Blockchain can keep a collective book-keeping of all transactions that are done via Crypto. This isn’t done behind closed doors as it would have been before by only one party. It can now be done on the Blockchain is a public ledger on the internet where all transactions are recorded and seen by everyone across the network.
On the Blockchain, all transactions are logged, like the time, date and the information on who the participants were and how much was traded. The transactions are verified by people called Miners who by using computer processing power and complicated mathematics maintain the ledger. This is done when the miners constantly check on the nodes, which each own a copy of the blockchain and all agreeing on state of the ledger. That means if anyone tries to corrupt the ledger, the node won’t arrive at a consensus and will refuse the accept the transaction in the blockchain.
Think as the miners as the new notaries, middle-man or bank but with less fees and faster transactions.
This is why we can always trust the blockchain as a shared single source of truth.
The user decides what the Bitcoin or Crypto represents, it doesn’t matter if its Dollars, Euro, Property, Wills or even Votes.
We give Bitcoin its value. For example, paper money like the US Dollar has nothing backing it. It’s just an idea that people created to trade things. If everyone decided tomorrow that paper money was worth nothing then it would not be used. When people decide something is worth something, then that is what will be used. It’s strange for people to understand because you can’t hold Bitcoin in your hand, it’s only bits of information on a screen that’s used to record information. This is what is disrupting the system but making it better…
Why is it better?
Because of this Bitcoin can represent many different types of payments or transactions, making our money smarter and to automise our cash flows.
For example; A company can automise it’s spending budgets on certain things like wages, machinery, maintenance and materials so it is not spent on needless things.
This can save companies, accountants and organisations thousands of Dollars in work and time that is put into these tasks.
Crypto can change the way we do business in the future. It makes transactions more transparent and efficient. The open programmable software allows us to completely up-end and change the processes we do business, because of it’s public ledger it decreases bureaucracy.
This technology is already here and can be used with current active machines. Think of automated cars. These cars can drive by themselves from point A to point B. These cars are built being unfamiliar with trust, but bitcoin isn’t. With Bitcoin, the car can be 100% exact when going to a destination, know when it needs to charge or fuel. It will also automatically know when it needs to be repaired, order parts and to book a mechanic.
This is how powerful Bitcoin is, it breaks the status quo and this is why other cryptocurrencies are being created all the time. They do different things, work on different projects to make certain things work better and create new applications. Whether it’s using processing power to provide loans to people without worrying about credit history, transactions that take place within minutes and not days, or lets you engage in anonymous, untraceable transactions.
This is the future of currency, this is Cryptocurrency…
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