There are many new and upcoming cryptocurrencies, but it is Bitcoin (BTC) that has been the basis of all cryptocurrencies to date and you can exchange your bitcoin with ordinary currency and transfer it to your bank account or any other way of sending money.

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Many people are skeptical about cryptocurrency but keep in mind that millions of people are also making money today with this method. Some have also become rich because they have invested in cryptocurrency. But what exactly is cryptocurrency?

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It is also a type of currency, just like the peso or dollar the only difference is that cryptocurrency has no physical properties because it is Digital currency. An example of Digital currency is your credit card, you make purchases but you do not use physical money.

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Cryptocurrency is an alternative form of payment to cash, credit cards, and checks. The technology behind it allows you to send it directly to others without going through a 3rd party like a bank. This means you don’t have to use your social security or credit score as collateral and allows you to be reasonably pseudonymous. In other words, cryptocurrencies are like virtual accounting systems. They keep a record of all transactions. The transactions are bundled into blocks, which are cryptographically signed (hence “crypto”currency) and the client doing the signing gets some number of units of virtual currency (and potentially transaction fees) as a reward for doing the work of calculating the cryptographic signature.

As you can imagine, there are many exciting use cases for this. You can send money back to your family without incurring hefty international fees if you’re working a different country. Merchants no longer have to worry about payment fraud or invalid checks because people can only spend what they have.

The most famous cryptocurrency is, of course, Bitcoin, which made everyone curious about the topic of crypto by its explosive rise and has become the de facto standard for cryptocurrencies. If you are eager to learn more about Bitcoin I highly recommend you to get acquainted with this article written by Brian Yahn on Hackernoon. Besides Bitcoin, there are several other pretty important cryptocurrencies such as Ethereum (ETH), Litecoin (LTC), Dash and Ripple (XRP).

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Source of information Liza Deikun

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What is Blockchain?

 

All cryptocurrencies use distributed ledger technology (DLT) to remove third parties from their systems. DLTs are shared databases where transaction information is recorded. The DLT that most cryptocurrencies use is called blockchain technology. The first blockchain was designed by Satoshi Nakamoto for Bitcoin.

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A blockchain is a database of every transaction that has ever happened using a particular cryptocurrency. Groups of information called blocks are added to the database one by one and form a very long list. So, a blockchain is a linear chain of blocks! Once information is added to the blockchain, it can’t be deleted or changed. It stays on the blockchain forever and everyone can see it.

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The whole database is stored on a network of thousands of computers called nodes. New information can only be added to the blockchain if more than half of the nodes agree that it is valid and correct. This is called consensus. The idea of consensus is one of the big differences between cryptocurrency and normal banking.

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At a normal bank, transaction data is stored inside the bank. Bank staff makes sure that no invalid transactions are made. This is called verification. Let’s use an example;

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George owes 10 USD to both Michael and Jackson. Unfortunately, George only has 10 USD in his account. He decides to try to send 10 USD to Michael and 10 USD to Jackson at the same time. The bank’s staff notice that George is trying to send money that he doesn’t have. They stop the transaction from happening.

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The bank stopped George from double spending which is a kind of fraud. Banks spend millions of dollars to stop double spending from happening. What is cryptocurrency doing about double spending and how do cryptocurrencies verify transactions? Remember, they don’t have stuff as the bank does!

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Source : Ray King