What is Cryptocurrency? A Brief History of Cryptocurrency How Does Cryptocurrency Work?

Index

• What is Cryptocurrency?
• A Brief History of Cryptocurrency
• How Does Cryptocurrency Work?
• Traditional Currencies vs.Cryptocurrencies

What is cryptocurrency?

Cryptocurrency is a digital payment system that does not rely on banks to verify transactions. It is a peer-to-peer system that enables sending and receiving payments anywhere.

Cryptocurrencies have become increasingly popular over the past few years – as of 2018, there were over 1,600 of them! And the numbers keep growing. This has led to increased demand for developers of blockchain (the underlying technology of cryptocurrencies such as Bitcoin). The salaries that blockchain developers earn show just how much they're worth: In fact, the average salary for a full-stack developer is over $112,000. There is even a website dedicated to cryptocurrency work.

A Brief History of Cryptocurrency
During the caveman era, people used barter systems, where goods and services were exchanged between two or more people. For example, one can exchange seven apples for seven oranges. The barter system fell out of popular use because it had some obvious flaws:

 ★people's needs—If you have something to trade, someone else will want it, and you should want what the other person is offering.
★There is no common measure of value—you must decide how many of your items you are willing to trade for other items, and not all items can be shared. For example, you cannot divide a living thing into smaller units.
★ The product cannot be easily transported, unlike our modern currency, which fits in a wallet or stored in a mobile phone.
As people realized that the exchange system did not work very well, the currency went through several iterations: in 110 BC, an official coin was created; By 1250 AD, gold-plated florins were introduced and used throughout Europe; And from the 1600s to the 1900s, paper currency became increasingly popular and used around the world. This is how modern currency as we know it came into being.
Modern currencies include paper currency, coins, credit cards, and digital wallets—for example, Apple Pay, Amazon Pay, Paytm, PayPal, etc. It's all regulated by banks and governments, which means there's a centralized regulatory authority that limits how paper currency and credit cards work.

How does cryptocurrency work?
Cryptocurrency is a digital or virtual currency that uses cryptography for security. Due to these security features it is difficult to counterfeit a cryptocurrency. Cryptocurrencies are decentralized and not subject to regulation by governments or financial institutions. And the decentralized control of each cryptocurrency works through distributed ledger technology, typically a blockchain, that acts as a public financial transaction database. The most famous cryptocurrency is Bitcoin, which was created in 2009. Cryptocurrencies are designed through mining, which uses computing power to solve complex math problems that verify transactions on the blockchain, the public ledger of all cryptocurrency transactions. And miners are rewarded with cryptocurrency for their efforts. Cryptocurrency trading is speculative and complex, and involves significant risk. Prices may fluctuate on any given day. Given the price volatility, cryptocurrencies are only suitable for some investors. Therefore, cryptocurrency should be considered a high-risk investment. Before investing, understand the risks involved and consult a financial advisor.

Traditional Currency vs. Cryptocurrency
Imagine a scenario where you want to pay a friend who bought you lunch by sending money online to his account. There are several ways this could go wrong, including: The financial institution may have a technical problem, such as its systems being down or machines not working properly. Your or a friend's account could be hacked—for example, through a denial-of-service attack or identity theft. The transfer limit for your or your friend's account may be exceeded. There is one central point of failure: the bank. This is why the future of currency lies with cryptocurrencies. Now imagine a similar transaction between two people using a Bitcoin app. A notification appears asking the person if they are sure they are ready to transfer bitcoins. If yes, processing: The system authenticates the user's identity, checks whether the user has the required balance for that transaction, and more. After this is done, the payment is transferred and the money is deposited.