What is Cryptocurrency – The ultimate guide from Coding compiler you should read it now.! People treat cryptocurrency differently. Some consider it the main reason for the revolutionary changes in the field of electronic payments, others – the next candy wrappers for participation in financial pyramids. Anyway, today practically everyone has heard about cryptocurrency. But not everyone has a sufficient understanding of what a cryptocurrency is and why it is needed, how the term cryptocurrency is defined, where crypt comes from, what are the advantages of cryptocurrency and its disadvantages. All these questions are revealed in this article.
What is Cryptocurrency?
Table of Contents:
- What is Cryptocurrency in simple words
- What is a crypt?
- What does a cryptocurrency look like?
- Advantages of cryptocurrency
- How does cryptocurrency appear?
- Cryptocurrency mining algorithms
- How to get cryptocurrency?
- Where to store cryptocurrency?
- The disadvantages of cryptocurrency
- Why do we need cryptocurrency?
- Types of cryptocurrency
- What is provided cryptocurrency?
- Capitalization, cost, ratings
- Legal regulation of cryptocurrency
- Cryptocurrency Outlook – Forecast
Cryptocurrency in simple words
The term became known in 2011 after an article about “cryptocurrency” was published in the famous magazine Forbes.
Publishers have decided to create the neologism “cryptocurrency” by combining two words “crypto” and “currency”. If everything is clear with “currency”, it is translated from English as “currency”, then you can dwell on “crypto”.
The word “crypto” comes from the Greek “kruptós”, which means something secretive, secret. There is a whole science – cryptography, which initially dealt with issues of encryption, and is currently exploring methods to ensure confidentiality, data integrity and authentication.
Thus, given the above, the term “cryptocurrency” can be given the following definition:
Cryptocurrency is a type of digital currency (electronic money) that is created and controlled using cryptographic methods.
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This digital currency is being formed and stored on the Internet in electronic wallets. The physical incarnation of this currency does not exist. Cryptocurrencies are created using a special cryptographic cipher, which consists of sequential hashing and electronic signature.
It may seem to uninitiated people that a cryptocurrency has much in common with classical electronic payment systems, but there is a huge difference between them. First of all, it is how these digital assets are produced and stored, but more on that later.
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What is a crypt?
On the Internet, it is very often possible to meet the modern slang word – “crypt”, used in the context of Hi-Tech technologies. In this case, “crypt” is an abbreviation for the word cryptocurrency.
Do not confuse this unofficial slang with the actually existing ancient Greek term “crypt”, which means a covered underground passage or hiding place, usually in a temple, or a “lower” church.
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But if you think about it, then both terms ultimately derive from the word “crypto”, the meaning of which is given above. So everything falls into place.
What does a cryptocurrency look like?
You can say that in any way. Cryptocurrencies do not have a physical embodiment. The transfer of cryptocurrency as banknotes is impossible, because it is, in essence, records of completed transactions. For example, Ivan translated to Peter 10 Bitcoins. This will be indicated by a specific entry in the blockchain. These bitcoins will be on Peter’s account until he transfers them to another user.
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Advantages of cryptocurrency
Cryptocurrency has the following advantages:
- No need for intermediary services for currency exchange
- Complete anonymity
- Transparency of transactions
- Minimum or zero amount of transfer fees
- Independence from inflation
- Ease of use
The creation of cryptocurrency does not require the existence of any centralized authority that issues title units, such as the US Federal Reserve System or the Central Bank of the Russian Federation. As for electronic payment systems (Webmoney, QIWI, Yandex.Money, etc.), all of them are also directly related to the above-mentioned centralized bodies that control them.
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Cryptocurrency as no one controls and does not regulate. It is based on the so-called blockchain system – in simple terms – a distributed database. In this system, information is stored simultaneously on many computers, or nodes, worldwide. The number of computers that are used to store any cryptocurrency depends on its popularity. For example, the famous Bitcoin or Ethereum are stored simultaneously on hundreds of thousands of computers around the world.
No need for mediation services
When exchanging money held in electronic accounts, people use the services of banks, payment systems and exchangers acting as intermediaries. Each of them has its own rules, which at any second may undergo changes. In the most extreme cases, user accounts may even be subject to blocking.
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To use cryptocurrency, no intermediaries are needed. Users simply transfer funds to each other, regardless of their location. We can say that the main meaning of cryptocurrency is to eliminate intermediaries in conducting transactions.
In addition, the tax authorities are not able to track such transactions. Although anyone can see how much money from which account was transferred to another account, the number of which is also available, it is extremely difficult to determine their owners.
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Thanks to this approach, any fraud is excluded and the anonymity of users remains. The absence of the need for intermediary services causes a free transaction. In extreme cases, the commission is not more than one percent.
Another thing is that the processing of transfers with a higher commission brings miners – people who extract cryptocurrency, much greater benefit. Nevertheless, when working with cryptocurrencies, you can fix the amount of remuneration, which will be several times less than in traditional banks and exchange offices.
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How does cryptocurrency appear?
Cryptocurrency is a code that appears as a result of certain mathematical calculations. Most often, this process looks like this: users are engaged in sending transactions to each other, from which sequentially connected and confirmed blocks are formed. With each formed block, a certain amount of cryptocurrency is issued, which is transferred to the one who confirmed the block. This process is called mining, and its members are called miners.
It is this method of extraction and storage of cryptomonet that allows it to be decentralized. It is noteworthy that any person can theoretically cryptocurrency. All that is needed is a fairly powerful computer and a small set of special programs.
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In the same way as in the nineteenth century, many people sought to find gold by any means possible; today cryptocurrency is mined. To do this, sometimes form a huge “farm” for mining, which generate cryptomonet around the clock. Moreover, it is even possible to create and launch your own cryptocurrency. In case of gaining the confidence of miners and stock traders, the creator of the new cryptocurrency is guaranteed great success and prosperity.
Interestingly, in some cryptocurrencies, all coins appear immediately after the launch of the system, and not in the long process of their extraction. Such cryptocurrencies include Stellar, Cardano, Ripple and others. However, much more popular are cryptocurrencies, the tokens of which are mined by traditional mining: Bitcoin, Litecoin, Ethereum, Dash, Monero, etc.
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Cryptocurrency mining algorithms
As mentioned above, all transfers in cryptocurrency systems are encrypted using different algorithms. For example, Bitcoin transactions are encrypted using the SHA-256 algorithm, and Litecoin are encrypted using the Scrypt algorithm. There are other algorithms: N-Scrypt, X11, X13, X15, CryptoNote, each of which has its own advantages and disadvantages.
All transactions with cryptocurrencies are confirmed using confirmation algorithms. The most common of them – PoW (Proof-of-Work). Some cryptocurrencies, for example, Novacoin uses PoS (Proof-of-Stake, or share ownership). These and other algorithms are described in more detail in the article about mining.
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How to get cryptocurrency?
Firstly, this is the already mentioned mining, during which users receive crypto coins as a reward for generating cryptocurrencies. Secondly, you can sell any goods or services for tokens. Third, cryptocurrency can be purchased on exchanges (Exmo, Bitfinex, Poloniex, Bithumb, Bittrex, Kraken, etc.) or in exchange offices for ordinary money (US dollars, euros, rubles, etc.)
In addition, you can use the so-called. cryptocurrency taps, through which users get tokens for free. All you need to do to get them, – view ads or enter captcha. However, this way you can get quite a small amount of cryptomonet.
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Where to store cryptocurrency?
For storage of cryptocurrencies use special cryptocurrency wallets of different types. For example, cryptocurrency can be stored:
- on the hard disk of the computer;
- on an electronic wallet like blockchain.info;
- on physical media (hardware wallet);
- on the balance of the trading platform;
- in the mobile app
It is highly recommended that users keep their passwords in the most secure places. If access to the wallet is lost for any reason, then all the funds on it will be lost forever. Password recovery is not provided.
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The disadvantages of cryptocurrency
In addition to the risk voiced above the loss of funds when losing passwords to the wallet, cryptocurrency has a few drawbacks.
In particular, you need increased attention when performing transactions. In the case of transferring money to the wrong wallet, their return depends solely on the decency of its owner.
Another disadvantage of cryptocurrency is the uncertain attitude towards them from different states. Some of them see cryptocurrencies as an excellent means for making electronic payments, others impose restrictions or even prohibitions on their use.
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Why do we need cryptocurrency?
Now cryptocurrency, with its inherent anonymity, has become a kind of symbol of freedom. Direct transfers between users with minimal commissions and lack of control attract many adepts.
Due to the inability to track transactions and complete anonymity, cryptocurrencies are becoming increasingly popular in the world. Today, many stores already accept cryptocurrency as a payment. In the future, cryptomonettes are likely to become a full-fledged alternative to ordinary money. In addition, cryptocurrencies are used as investments, although they have increased volatility.
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Types of cryptocurrency
Bitcoin is the first cryptocurrency that appeared in 2009. Today it is the most expensive cryptocurrency in the world. According to official information, its creator is Japanese programmer Satoshi Nakamoto. However, since the launch of Bitcoin, there have been rumors that this name hides a whole group of anonymous developers.
Over the past years, about a thousand different cryptocurrencies have been launched, often created for use in certain areas. However, most of them are clones of each other under different names.
However, there are quite original designs. For example, Face is a special cryptocurrency for users of the social network Facebook, or GayCoin for representatives of the LGBT community. Some cryptocurrencies are distinguished by their names, for example, TeslaCoin or EinsteinCoin.
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The list of the ten most popular cryptocurrencies as of March 2018 is as follows:
As already mentioned, cryptocurrencies are often created to perform certain tasks. For example, Bitcoin is intended only for transactions. Ethereum is also used for money transfers, but beyond that it has smart contacts. Moreover, Ethereum serves as the basis for running decentralized applications.
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What is provided cryptocurrency?
Neither the gold reserves nor the state economy provides cryptocurrency. All of them have only one value – the demand of users. Only the cost of cryptocurrency depends on it. In addition, the developers of cryptocurrency almost always determine the amount of emission, after reaching which the issue of coins stops. For example: the amount of Bitcoin issuance is 21 million coins.
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Capitalization, cost, ratings
Lists of the most popular cryptocurrencies are published on specialized web portals, for example, at coinmarketcap.com. This site contains a table with popular cryptocurrencies, their value, capitalization, price chart and other parameters. Those interested in the topic can study the cryptocurrency rating on our resource, where the cost of cryptocurrency against the ruble, the US dollar, the hryvnia is published.
It is noteworthy that at the end of 2017, the total capitalization of cryptocurrency amounted to more than 500 billion dollars. At the beginning of 2018, capitalization reached $ 800 billion, but in the spring the amount dropped to $ 350 billion. Bitcoin is still the main cryptocurrency, with a market capitalization of 150 billion dollars.
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Legal regulation of cryptocurrency
Governments of different countries have different attitudes to cryptocurrencies. So, in Japan, Bitcoin received the official status of a payment instrument at the beginning of 2017. Not so long ago, the Germans followed the Japanese, recognizing Bitcoin as a settlement unit. They look positively at cryptocurrencies in Switzerland, the USA and Canada, where they pass as valuable property. In Bulgaria, cryptocurrencies are considered financial assets, and in the UK – foreign currency. In Iceland, the acquisition of cryptomonet is prohibited, but mining is allowed. Cryptocurrency is not prohibited on the territory of the Russian Federation.
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Nevertheless, the Ministry of Finance plans to adopt a law on cryptocurrency this year. Judging by the preliminary text of the draft law, mining in Russia will become a kind of business activity, but cryptocurrency will not become an officially recognized means for payments.
The situation with cryptocurrency in Ukraine is not yet clear. Last year, as many as three bills were submitted to the Verkhovna Rada, but none of them have yet been passed.
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Cryptocurrency Outlook – Forecast
Analysts predict the active development of cryptocurrency in the coming years. Probably, some cryptocurrencies will become a thing of the past, but they will be replaced by new, more progressive developments. It is safe to say that cryptocurrency is a serious and long-lasting one. Even if a number of states prohibit their use, they will not go anywhere.
However, it is unlikely that anyone will completely deny the possibility of using cryptocurrency. Today, governments of different countries are more interested in cryptocurrency regulation. Therefore, in the current year we should expect the results of steps taken in this very direction.
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