Today, cryptocurrency has become a global phenomenon which is known to most of the people across the globe. In 2019, you won’t find a single major bank, a prominent accounting company or a government of a successful nation that hasn’t researched on cryptocurrencies and published a paper on the same. Yet, an overwhelming majority of us don’t have the basic understanding of its fundamentals or have very limited knowledge about bitcoin, blockchain and cryptocurrency. Are you counting yourself in? No worries! Assignmenthelp.net is here at your service. Come, walk with our finance experts through the whole story of cryptocurrencies.
We will begin with some quick definitions of the terms.
A cryptocurrency is a digital means of exchange that uses encryption systems to govern the creation of monetary units and to validate the transfer of funds.
The most renowned cryptocurrency is Bitcoin for which blockchain technology was basically invented.
Blockchain is a technology that allows the presence of cryptocurrency.
If you have any questions or need any assistance in understanding cryptocurrencies and its related terms, please feel reach out to us and one of our finance experts will happily assist you.
Well, here is a brief history of cryptocurrencies...
Most of you must have heard about cryptocurrency when you happened to come across the first cryptocurrency- Bitcoin. Satoshi Nakamoto, is the mysterious inventor of Bitcoins. He created the world's first viable cryptocurrency.
Satoshi Nakamoto published a whitepaper titled – ‘A decentralized, peer-to-peer electronic cash system’, which went live as an open-source project and the project was known as Bitcoin. It was the first example of a functional cryptocurrency.
After then thousands of more cryptocurrencies have evolved. This has led to a booming industry established trading these currencies.
It is known to very few people that cryptocurrencies evolved as a side product of another invention with different intentions. Satoshi Nakamoto never had any intentions to invent a virtual currency. Satoshi just tried to make a digital cash system but without a central entity, like the Peer-to-Peer network for sharing files and data.
Satoshi Nakamoto is the creator, inventor, founder of bitcoin. Well, it is a pseudonym, no one really knows who this person actually is. Satoshi has more than enough bitcoins to flood the market, crash its value and make it worthless. Furthermore, he holds a huge influence to influence the future of bitcoins and direct the potential implications of cryptocurrencies as a whole.
The following reasons can be considered for the non-disclosure of Satoshi’s real identity:
It can be concluded that Satoshi and maybe a few other individuals possess the majority of the millions worth of bitcoins and thus they have the threat of becoming easy targets of criminals. Therefore, remaining anonymous is perhaps the best way for Satoshi to restraint exposure to the outside world.
A cryptocurrency is a digital asset that can be traded. It can be referred to as a digital form of money, which is developed on blockchain technology and which exclusively subsists online.
Cryptocurrencies are named so as they employ cryptography to authenticate and protect transactions. Presently, there are more than one thousand different cryptocurrencies across the globe and numerous people see cryptocurrencies as vital for a brighter future economy.
Jan Lansky has stated the following six conditions for a system to be a cryptocurrency:
Most popular cryptocurrencies these days are:
Cryptocurrencies work just like the fiat currencies that we use in our regular lives. They can be used to make payments for goods and services. In the earlier times, the number of companies which accepted cryptocurrencies was extremely limited. As people are being more aware, cryptocurrencies are becoming more mainstream.
As the most well-known cryptocurrency is Bitcoin, it is the most widely used cryptocurrency all across the globe. However, organizations have now started to see the limitations of accepting Bitcoin payments only and because of this, they have started to explore other cryptocurrencies too.
Crypto tokens are a unique type of virtual currency tokens that subsist on their own individual blockchains and represent an asset.
For instance, A can have a crypto token that represents X number of customer loyalty points on a blockchain that manages such details for a retail chain. There can be another crypto token that gives a right to the token holder to view ten hours of live streaming content on a blockchain that shares videos. There can be yet another crypto token that may represent another cryptocurrency, for example, a token being equal to 15 bitcoins on a specific blockchain. Crypto tokens can be traded and transferred amongst the participants of a particular blockchain.
In essence, crypto tokens work on top of a blockchain which acts as a medium for creating and executing decentralized apps and smart contracts, wherein the tokens are applied to facilitate the transactions.
Altcoins are the massive number of alternative cryptocurrencies that came into existence after the immense success gained by Bitcoin. The term literally refers to alternative coins i.e. virtual currency besides bitcoins.
They were introduced as better substitutes of bitcoin claiming to overshadow some of the other drawbacks of bitcoin.
Common examples of altcoins are Auroracoin, Litecoin, Peercoin, Namecoin, Bitcoin Cash and Dogecoin. All of them gained some level of success, but none managed to get popularity akin to bitcoin. Altcoins their own dedicated blockchains and are mainly used as a medium for making digital payments.
As bitcoin became a massive hit all around the world, a number of companies unveiled these altcoins. Here is a brief look at few of them:
Litecoin doesn’t need a heavy computer horsepower for its mining, a normal desktop computer does its job. What makes Litecoin an advanced version of bitcoin? Here is your answer:
Very much like bitcoin, ripple serves both as a currency and a payment system. But unlike Bitcoin transactions, that takes as long as 10 minutes to confirm, the payment mechanism of Ripple enables the transfer of funds in any currency to another participant of the Ripple network within a matter of few seconds.
The Electronic value held by MintChip can be securely transferred from one chip to another and its USP is that this particular cryptocurrency is backed by the Canadian dollar.
If you want to know what is Bitcoin, without floundering into the technical details, this article by Assignmenthelp.net is for you. You will be explained the working of bitcoin system in a lucid manner by our subject matter experts. If you are looking for something even more detailed please let us know in the chat section.
BITCOIN IN A NUTSHELL
Bitcoin - explained
It is the first released open-source software. Bitcoin is globally considered to be the first decentralized cryptocurrency. Since the release of bitcoin in 2009, over 4,000 altcoins - alternative variants of bitcoin or other cryptocurrencies have evolved.
Small wonder that just after a decade of existence, Bitcoin’s price is constantly increasing and reaching new heights on a regular basis. From zero to around 11000 Dollar, and its transaction volume has reached more than 4 lakh daily transactions.
Bitcoin has come a long way in a relatively short time. All we can say is that Bitcoin – the first and most famous cryptocurrency to date is here to stay for much longer.
“You can’t stop things like Bitcoin. It will be everywhere and the world will
“Bitcoin will do to banks what email did to the postal industry.”
Interesting much, isn’t it? Moving forward to the technology that made this wonder possible...
A BRIEF LOOK AT BLOCKCHAIN TECHNOLOGY- THE ARCHITECTURE OF CRYPTOCURRENCY
Blockchain is the digitalized platform behind the wonder cryptocurrencies - Bitcoin and altcoins. Blockchain intended to develop a faster, more efficient system to transfer, receive, and track orders by applying secure data.
The blockchain is a decentralized record of all transactions across a peer-to-peer network interface. By applying the aforementioned technology, participants can verify transactions without a need for any central clearing administration. This technology may potentially be introduced in fund transfers, settling trades, balloting and many other subject matters.
It is a bit complex and technical but we will explain it as simply as possible.
There are three main technologies that assemble together to develop a blockchain. None of them is a new invention, it is just the way they are applied, that is new. The technologies are:
To understand how the above-mentioned technologies work hand in hand to develop secure digital networking system, go through the following explanation:
Two people want to make transactions through the internet.
Each one of them has both a private key and a public key.
Making a secure digital identity reference is the main motive of this element of blockchain technology. The possession of a combination of private and public cryptographic keys is the basis of the identities of the network participants.
An extremely useful digital signature is created through a combination of these two keys. This digital signature provides the foundation for strong control of ownership for the Participants of the transaction.
BLOCKCHAIN: DISTRIBUTED LEDGER TECHNOLOGY (DLT)
Ledgers are the foundation of the accounting system, that is as ancient as writing and money.
Here is the simplest meaning of a distributed ledger:
A database undertaken and updated individually by each and every participant of a large network is called a distributed ledger. The distribution is pattern is not common: the transactional or data records are not sent to all the participants by a central authority or any intermediary, they are independently recorded and held by every member. Yes, every single participant of the network processes every single transaction, comes to its own individual conclusion and then vote on those conclusions to ascertain what the majority of the peers agree with.
To eliminate the requirement of a central authority or intermediary to operate, verify or validate transactions, a distributed ledger is decentralized. Entities apply the technology of distributive ledger to process, verify or authorise transactions or other types of transfers of data. To be precise, these transactional records are stored in the ledger only and only when the consensus has been received by all the participants involved in the network.
Timestamping and allotment of a unique cryptographic signature is a done to each and every data in the p2p network. All of the participants on the distributed ledger have access to all of the records of the transactions. The technology allows a history of all details registered on a specific dataset that can be verified as well as audited.
The diagram below shows the simple difference between a centralized system of ledger and a decentralized system of ledger:
Although Bitcoin gets all the press and media coverage because of its huge market capital, the true hero is its underlying technology- Blockchain. Blockchain technology is implemented in every organization of every industry- bet it government or be it private.
Blockchain can be thought of as a type of next-generation business process improvement software from a business perspective. It is like a Collaborative technology that ensures to improve the business operations between companies as well as radically reduce the cost of privacy and protection.
Ways are being explored by Financial institutions as well regarding how to apply blockchain technology to upend everything ranging from clearing and settlement to insurance.
When technology develops so rapidly, it’s not wise to just sit on the sidelines. We all have watched blockchain shift from a simple start-up idea to an established technology. In just a short span of time, it has taken over the internet and its participants. Blockchain technology is going to result in a radical competitive future for the entire financial services industry.
Credit goes to the platform of Blockchain for letting cryptocurrencies come into play. It has become possible to form a network of distributed ledger because of this technology. Blockchain allows the transfer of value and information and also acts as a means of transactions between the peers.
Coming to cryptocurrencies, these are the encrypted tokens used in these networks to send values and make payments for these transactions. Furthermore, they are also employed to digitize the value of an asset.
To conclude, we can say that Blockchains serve as a fundamental technology for facilitating the function of cryptocurrencies. They go hand in hand as without crypto there won’t be any major transactions on blockchain and blockchain is primarily required for these transactions to be recorded and transferred.
CRYPTOCURRENCIES: FUTURE OF THE GLOBAL ECONOMY
Satoshi Nakamoto must haven’t dreamt of the success cryptocurrencies of gained, primarily due to its revolutionary characteristics. No other attempt to make a digital cash system attracted this many critical masses of users. A wave of fascination and enthusiasm was created by bitcoin all across the globe.
Cryptocurrencies are considered to be digital gold. Money safe from the influence of politics and which increases its value over time is sound money. Cryptocurrencies have a worldwide scope as they are one of the most speedy and convenient modes of payment.
Even though cryptocurrencies are mostly used for making payments, their use as a means of speculation and a store of value also attracts amass of users. An incredible, dynamic and fast-growing market for investors and speculators was born along with the birth of cryptocurrency. Okcoin, poloniex and shapeshift are few of the exchanges which permit the trade of hundreds of cryptocurrencies. Their daily trade volume is more than that of big European stock exchanges.
The cryptocurrency’s market is extremely fast and volatile. Almost every other day new cryptocurrencies are introduced, they get old and vanish, adopters knowing the concept of first-mover advantage get rich and investors suffer a loss of money. A promise of a big hit to turn the world around is made by every new cryptocurrency. Few among them survive the initial months, and then sooner than later they are dumped by speculators.
The dirtiness of markets won’t change the fact that cryptocurrencies are here to stay and to change the world. Moreover, change is already happening. People all across the globe are buying Bitcoins to safeguard themselves against the devaluation of their nation’s currency.
The revolution has already begun. Institutional investors have started to purchase cryptocurrencies. Governments and Banks have realized that this invention has the ultimate potential to impact their ruling and controlling powers. Cryptocurrencies have changed the world as a whole. One can either stand beside and keep wondering or can participate in the history in making.
We hope that we were able to provide you a thorough explanation of the basics of cryptocurrency, the technology on which it is built and most importantly- Bitcoin. In case you have any queries regarding any topics that we have discussed, please reach out to us by contacting our finance experts at Assignmnethelp.net. We will be happy and delighted to serve you to the best of our capabilities.
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