The advent of cryptocurrency is already taking over in our daily transactions. Cryptocurrency is a digital asset that exists in the cryptographic world and many referred to it as “digital gold”. But what is cryptocurrency really? He must be asking you.
This is a digital asset intended to be used as a medium of exchange. Obviously, this is a close substitute for money. However, it uses strong cryptography to secure financial transactions, to verify the transfer of assets, and to control the creation of additional units. All cryptocurrency is a virtual currency, a digital currency or an alternative currency. It is important to note that all cryptocurrencies use a decentralized control system as opposed to the centralized systems of banks and other financial institutions. These decentralized systems operate using distributed logging technology that serves a public financial database. Typically, a blockchain is used.
What is a blockchain?
This is a list of ever-growing records that are linked and protected by cryptography. This list is called blogs. 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 blog to be used as a distributed logbook, it is managed by a peer-to-peer network that collectively adheres to a protocol for validating new blogs. Once the data has been recorded in any book, it cannot be modified without altering all the other blocks. Therefore, blockchains are secure by design and also act as an example of a distributed computer system.
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History of cryptography
David Chaum, an American cryptographer, discovered an anonymous cryptocurrency called ecash. This happened in 1983. In 1995, David implemented it through Digicash. Digicash was an early form of cryptographic electronic payment that required user software to withdraw banknotes from a bank. It also allowed the designation of specific encrypted keys before they were sent to a recipient. This property prevented the government, the issuing bank, or any third party from locating the digital currency.
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After increasing efforts in the following years, Bitcoin was created in 2009. This was the first decentralized cryptocurrency and was created by Satoshi Nakamoto, a pseudonymous developer. Bitcoin used SHA-256 as a cryptographic hash function (working test scheme). Following the launch of bitcoin, the following cryptocurrencies were also launched.
1. Namecoin (April 2011)
2. Litecoin (October 2011)
These three coins and many others are called altcoins. The term is used to refer to alternative variants of bitcoin or simply other cryptocurrencies.
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It is also important to note that cryptocurrencies are exchanged over the Internet. This means that its use is mainly outside the banking systems and other government institutions. Cryptocurrency exchanges include the exchange of cryptocurrency with other assets or other digital currencies. Conventional trust money is an example of an asset that can be traded in cryptocurrency.
They refer to a proposed mechanism by which a cryptocurrency can be exchanged directly from another cryptocurrency. This means that with atomic exchanges, the participation of third parties in the exchange would not be necessary.