Crypto Currency: From Bitcoin to Blockchain

Uploaded on 2023-01-11 in TECHNOLOGY--Developments, FREE TO VIEW, BUSINESS-Services-Financial, TECHNOLOGY-Key Areas-Blockchain

A crypto-currency is a digital or virtual currency that is meant to be a medium of exchange. It is quite similar to real-world currency, except it does not have any physical embodiment, and it uses crypto-graphy to work. A crypto-currency is secured by crypto-graphy, which makes it nearly impossible to counterfeit or double-spend.

Many crypto-currencies are decentralised networks based on blockchain technology, a distributed ledger enforced by a disparate network of computers.

Crypto-currency received its name because it uses encryption to verify transactions. This means advanced coding is involved in storing and transmitting crypto-currency data between wallets and to public ledgers. The aim of encryption is to provide security and safety.

The first crypto-currency was Bitcoin, which was founded in 2009 and remains the best known today. Much of the interest in crypto-currencies is to trade for profit, with speculators at times driving prices skyward.
Crypto-currencies have become increasingly popular over the past several years and as of 2018, there were more than 1,600 of them, and the number is constantly growing.

A defining feature of crypto-currencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.

The future of currency many users say lies with crypto-currency. Now imagine a similar transaction between two people using the bitcoin app. A notification appears asking whether the person is sure he or she is ready to transfer bitcoins. If yes, processing takes place:

The system authenticates the user’s identity, checks whether the user has the required balance to make that transaction, and so on. After that’s done, the payment is transferred and the money lands in the receiver’s account. All of this happens in a matter of minutes.

Crypto-currency, then, removes all the problems of modern banking: There are no limits to the funds you can transfer, your accounts cannot be hacked, and there is no central point of failure.

As mentioned above, as of 2018 there are more than 1,600 crypto-currencies available; some popular ones are Bitcoin, Litecoin, Ethereum, and Zcash. And a new crypto-currency crops up every single day.

How to Buy Crypto-Currency

You may be wondering how to buy crypto-currency safely. There are typically three steps involved. These are:

Step 1: Choosing a platform: The first step is deciding which platform to use. Generally, you can choose between a traditional broker or dedicated crypto-currency exchange:

Traditional brokers. These are online brokers who offer ways to buy and sell crypto-currency, as well as other financial assets like stocks, bonds, and ETFs. These platforms tend to offer lower trading costs but fewer crypto features.

Crypto-currency exchanges. There are many crypto-currency exchanges to choose from, each offering different crypto-currencies, wallet storage, interest-bearing account options, and more. Many exchanges charge asset-based fees.

When comparing different platforms, consider which crypto-currencies are on offer, what fees they charge, their security features, storage and withdrawal options, and any educational resources.

Bitcoin

Bitcoin is a type of digital currency known as crypto-currency. Similar to traditional currencies, like the dollar, pound or euro, there are many types of digital currencies. Other popular ones include Ethereum and Dogecoin.
Unlike traditional currencies, though, Bitcoin is not backed or controlled by centralised financial institutions.
Instead, it is decentralised. This makes it popular for people who think decentralisation can bring financial freedom, but it also makes it extremely volatile, rising and falling in value at the whim of Bitcoin buyers and sellers.

Blockchain

The original blockchain was designed to operate without a central authority and so without a central bank or regulator controlling who transacts, but transactions still have to be authenticated. This is done using cryptographic keys, a string of data, like a password, that identifies a user and gives access to their “account” or “wallet” of value on the system.

Each user has their own private key and a public key that everyone can see. Using them both creates a secure digital identity to authenticate the user via digital signatures and to ‘unlock’ the transaction they want to perform.
Blockchain is the technology underpinning all crypto-currencies, and many other products like NFTs (Non Fungible Tokens). All of the buying, selling and trading of cryptocurrencies is recorded onto this virtual spreadsheet, which is arranged in blocks linked together in a giant chain.

A blockchain is a type of distributed ledger. Distributed ledger technology (DLT) allows record keeping across multiple computers, known as “nodes.”

Any user of the blockchain can be a node, but it takes a lot of computer power to operate. Nodes verify, approve, and store data within the ledger. This is different from traditional record-keeping methods which store data in a central place, such as a computer server. A blockchain organises information added to the ledger into blocks, or groups of data. Each block can only hold a certain amount of information, so new blocks are continually added to the ledger, forming a chain.

Every crypto-currency transaction is individually recorded onto the blockchain by a huge network of volunteers verifying its authenticity by using computer programmes. Since the blockchain is decentralised, it's not stored on one machine or network or owned by one company. The information is accessible to everyone.

As of May 2022, El Salvador and the Central African Republic were the only countries in the world to accept Bitcoin as legal tender for monetary transactions.

Crypto-currency

Bitcoin is the most popular and valuable crypto-currency. An anonymous person called Satoshi Nakamoto invented it and introduced it to the world via a white paper in 2008. Satoshi thought that the banks and governments had too much power that they used in their own self-interests. Satoshi envisaged a new type of money called Bitcoin that could change that: a crypto-currency that wasn’t controlled or run by central banks or governments, that you could send anywhere around the world for free, with no person or institution in charge.

At first nobody paid attention to Satoshi’s wild ideas, but slowly more and more people started buying and using Bitcoin. Many believed it was the future of money, and the worse the big banks behaved the more popular it became.

Since it was formulated and launched in 2009, Bitcoin has grown to a network of around 10,000 “nodes” or participants Today, there are thousands of crypto currencies present in the market today, Ethereum, Dogecoin and many others.

Crypto Exchange

A crypto exchange is the digital platform where investors can buy, sell and trade cryptocurrencies. Similar to traditional investing, a crypto exchange acts as a brokerage where people can transfer traditional money, like pounds or dollars, from their banks into cryptocurrencies like Bitcoin or Ethereum. Most transactions are accompanied by fees.

Crypto Wallet

A crypto wallet is a place where investors hold their cryptocurrency. It stores the virtual assets much like a traditional wallet holds cash. There are two types, a hot wallet and a cold wallet.

Hot wallets are connected to the Internet, and thus more accessible for quick transfers and easy access.

Cold wallets are physical devices like specially designed USBs that store crypto offline typically for safer and longer term storage.

In Conclusion

Crypto currencies and the underslying blockchain technologies are in their relative infancy and at this stage can only be considered considered as highly speculative investements, not east because of their widespread use to facilitate cybercrime. If you plan to participate, do your research and invest be prepared to lose any money that you do invest.

Euromomey: BBC: Investopedia: Kaspersky: Simplilearn: Time:

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