Where Did it All Begin?
The year 2008 marks the beginning of the new world of currency with credit to the Japanese Cryptocurrency guru Satoshi Nakamoto. He changed the game after releasing the “Bitcoin: A Peer-to-Peer Electronic Cash System” white paper. Bitcoin was the first form of cryptocurrency introduced to the internet.
How is it Different from Hard Cash?
Nakamoto mentions the crucial difference comes down to the payment system. Instead of basing it on trust, it functions on “cryptographic proof”. Instead of placing your trust in the Wolf of Wall Street, you can just trust the electronic, non-bias system. Think of it as a new way of engaging with money, but it’s completely decentralized and digital. It’s the same sort of process if you were to invest in stocks with normal currency. You are also able to buy goods and services.
How does it Work?
This tight cryptographic system of producing verified transactions is called Blockchain technology. A Blockchain is an electronic ledger to record transactions in the form of code. whenever a transaction is made, it’s recorded in a block. This block is then linked to a blockchain that is linked to the other transactions, making a “chain”. Every user receives a digital copy of this ledger and is updated each time a transaction is completed.
What About Fraud?
Fraud is a massive concern for anyone who deals with trusting someone with their money. It is a common issue society is dealing with at every scale of finances. There are two techniques to check and prevent fraud before the transaction is added to the blockchain. The first is “proof of work” and the other is “proof of stake”.
Proof of Work
The “proof of work” technique uses an algorithm that requires a lot of computer power to try to solve. Think of it in a way that once this mathematical riddle is solved, your transaction is validated. the computers that are trying to solve these riddles are known as “miners”. The first miner to solve the riddle receives some crypto as a reward.
Proof of Stake
The “proof of stake” method uses a lot less power for it is much more active participation of the user. Instead of a riddle, the user places an amount of crypto into a “communal safe” to verify their intentions. the amount of crypto you “stake” determines the number of transactions they can do. The world is changing and it’s increasing in speed and velocity with each creation. The future is an integrated, digital spectrum of opportunity. The decentralizing way that cryptocurrency operates is creating opportunities for more people. Who knows, you might jump in and make a few bucks from the comfort of your couch.