Cryptocurrency is different from standard electronic money. This is mainly because there is no real physical analogue to this cryptoasset. Any electronic currency can be taken in real via ATM but cryptocurrency cannot. It can exist only inside of the computer network. Commonly, their creation is supported by special encryption algorithms.
The majority of countries do not accept crypto money for payments. There are regions that have already recognized digital coins as legal assets, however they are exceptions.
The value of traditional money is defined by the state with regard to the material worth. Some time ago banknote was dependent on gold. This meant that every banknote was backed by gold bars. Today, governments can print as much money as they want. This leads to inflation and price increase.
In 2008 a group of enthusiasts under the pseudonym of Satoshi Nakamoto invented Bitcoin. In the Bitcoin whitepaper, there were explanation, reasoning, technical details and some more useful information about the innovative product. Several years later, the code creation was fully completed, and the Bitcoin network based on blockchain technology appeared.
The name of Blockchain speaks for itself. It is simply a set of blocks tied together one by one. Every block holds some data. Moreover, every block “knows” which one is the previous. The data inside of these blocks is records describing processes in the peer-to-peer network. Each separate event is called transaction. As a new transaction appears, it will be recorded to the new block as soon as possible. Each transaction contains information about the amount of funds transferred from one account to another, and every user can see data about all transactions in blockchain.
In order to implement changes, each new block must be transferred across the peer network. On the other way, there is no personal data kept. The only way to identify the transaction is by the wallet address but this gives you nothing more. This is similar to how torrents work. All operations with cryptocurrencies can be performed with the help of a special program called “crypto wallet”. Each wallet allows checking data in blockchain, create new transactions or put the existing one in a block.
It should be noted, that the term “blockchain” and “Bitcoin” are not synonyms. Blockchain is a type of technologies, while Bitcoin is an example of its implementation.
So what cryptocurrencies actually are?
Cryptocurrency is an absolutely new type of money, that strongly differs from the traditional ones. The main features of any cryptocurrency are:
Creating a crypto wallet takes around ten minutes and can be done from your home PC. This is a really simple process, as getting an account in a bank will take you much more time and effort.
- No authority
There is no central management node. Each participant has equal rights. This mean that anyone can start working with cryptocurrencies and manage them in accordance with the publicly known rules.
No one can find out who the owner of a crypto wallet is. All data in the system is anonymous. Besides, you can get as many wallets as you want.
- Low commissions
Banks take a lot of money for financial operations. When it comes to Bitcoin, you don’t have to pay a fortune.
The blockchain is clear and all data in it is available for each participant, as blocks within the whole chain are tied to each other with the help of complex mathematical functions.