Finance

What is cryptocurrency and it’s history?

What is cryptocurrency and it’s history?

A crypto currency is a purely digital or virtual currency and basically consists of nothing more than entries in a special database, the so-called blockchain. The name cryptocurrency comes from the fact that cryptographic encryption is used to verify transactions and control the generation of new currency units. The ADAX encryption also ensures that no one can change the entries in the blockchain afterwards.

The history of the cryptocurrency

There were many attempts to create a digital currency during the technology boom of the 1990s. Systems like DigiCash, Flooz or Beenz appeared on the market, but failed after a short time and disappeared again. There were many different reasons for its failure. These included fraud, developers ‘financial problems, and even disputes between developers’ employees and their managers. All of these systems used a so-called trusted third-party approach. Trusted third-party are companies that verified and facilitated transactions. Due to the failure of these companies, the creation of a functioning cryptocurrency was considered.

At the beginning of 2009, a programmer who has not yet been unequivocally identified under the pseudonym Satoshi Nakamoto presented Bitcoin as a crypto currency. Satoshi called the Bitcoin a peer-to-peer system for electronic money. Bitcoin was the first fully decentralized cryptocurrency. Decentralized means there are no servers and no central control facility. Bitcoin is not controlled by banks , governments or developers.

Fundamental problems with cryptocurrencies

One of the most important problems that a cryptocurrency must solve in order to be successful is the double issuance of currency units. The traditional solution was a trustworthy trusted third party – a central server – that kept records of the balances and transactions. However, this method always involved an authority that basically had control over the currency and personal information of the users. In a decentralized network like Bitcoin, each individual participant has to take on this task. This is done via the blockchain. In a sense, the blockchain is a public ledger for all transactions within the network. The data in the blockchain is available to everyone so that everyone in the network can see the balance of each account.

How are cryptocurrencies transferred?

With every transaction A cryptocurrency is a file that contains at least two unique pieces of information. The sender’s public key and the recipient’s public key. Added to this is the number of units to be transferred. The transaction is transferred to the network. Before it is completed, it must be confirmed. The confirmation can only be given by the so-called miners by solving a mathematical problem. The miners take transactions, confirm them and distribute them over the network. Each node or computer in the network then adds the new transactions to its database. Once a transaction has been confirmed by the miner, it cannot be reversed and is forgery-proof.

Published by Bob Dancer