The emergence of cryptocurrency is already taking over in our daily transactions. Cryptocurrency is a digital asset that exists in the world of crypto, many calling it "digital gold". But what is cryptocurrency? You must ask yourself.
It is a digital asset intended to be used as a means of exchange. Clearly, this is a close substitute for money. However, it uses powerful cryptography to secure financial transactions, verify the transfer of assets and control the creation of new units. Any cryptocurrency is a virtual currency, a digital currency or an alternative currency. It is imperative to note that all crypto-currencies use a decentralized control system as opposed to the centralized systems of banks and other financial institutions. These decentralized systems use distributed general ledger technology that serves as a public financial database. Normally, a blockchain is used.
What's a blockchain?
This is an ever-growing list of linked and secure records using cryptography. This list is called blocks. A blockchain is an open and distributed ledger that can be used to record transactions between two parties in a verifiable and permanent manner. To allow a block to become a distributed large book, it is managed by a peer-to-peer network that collectively adheres to a new block validation protocol. Once the data is saved to a book, it can not be edited without changing all the other blocks. Therefore, blockchains are secure by design and also serve as an example of distributed computer system.
The history of cryptography
David Chaum, an American cryptographer discovered an anonymous cryptographic electronic money called ecash. That happened in 1983. In 1995, David implemented it via Digicash. Digicash was one of the first forms of cryptographic electronic payment requiring user software to be able to withdraw banknotes. It also allowed the designation of specific encrypted keys before being sent to a recipient. This property allowed the government, the issuing bank or a third party to recover the digital currency.
After more efforts in the following years, Bitcoin was created in 2009. It was the first decentralized cryptocurrency created by Satoshi Nakamoto, a pseudonym developer. Bitcoin used SHA-256 as a cryptographic hash function (proof of work scheme). Since the release of Bitcoin, the following crypto-currencies have also been released.
1. Namecoin (April 2011)
2. Litecoin (October 2011)
These three pieces and many more are called altcoins. The term is used to refer to alternative variants of Bitcoin or simply other crypto-currencies.
It is also imperative to note that cryptocurrencies are exchanged over the Internet. This means that their use is mainly external to banking systems and other government institutions. Cryptocurrency trading includes the exchange of cryptocurrency with other assets or with other digital currencies. Conventional currency is an example of an asset that can be exchanged with a cryptocurrency.
These refer to a proposed mechanism by which a cryptocurrency can be exchanged directly from another cryptocurrency. This means that with atomic trading, it would not be necessary to involve a third party in the exchange.