Cryptocurrencies in Detail
Right now, the cryptocurrencies are taking the world by storm! There are a lot of examples of success in the blockchain and people are getting rich overnight by using these currencies. Hence, the currencies are money of the future, not to mention the fact that the shockwaves are spread globally.
While these currencies pack a good punch when it comes to business gains, there is also a downside to them.
Unfortunately, most of the people will not understand the geeky-gears behind the Blockchain. And that is the main reason why the cryptos are not well-understood by most people, banks, governments and many big companies.
There might be a lot of activity around you to educate people how cryptos work. However, here at cryptocurrency.net.nz , we decided to educate our audience what cryptocurrencies really are! So, if you are a person who is still scratching his head about what cryptos are, don’t worry! We’ve got you covered!
Meaning of Cryptocurrency
The answer of this question lies within the word cryptocurrency. In this name, the term “crypto” refers to hidden and currency is a medium of exchange that we all know about. Hence, this is a decentralized system of monetary exchange that is an alternative to the Centralized system.
The cryptocurrencies are digital assets that aim to work as a medium of exchange. This entire system is safe by using cryptography, implying that tracing a crypto currency is impossible.
The main thought behind the cryptos is the use of private business data on lesser private networks. Additionally, another thought of using a system of decentralized currency is also in effect
What is Cryptocurrency
Working of an Electronic Cash System
At this point, we must consider how an electronic system of cash works. In order to complete a transaction, a user requires a payment network with accounts, balances and transactions.
The major issue in that case is the over or under-spending of the cash; or the probability where a minor change in the instructions can completely change a transaction.
In order to overcome the spending issues, a server needs to constantly verify whether or not the instructions are changing. This way, it keeps a record and prevents errors and omissions in a system of cash.
Innovative Decentralized Approach
However, in a decentralized approach, we don’t have that server for record keeping. Hence, every device manages its own record. So, every entity in the system keeps a private record of files to check the errors and omissions (if any).
To sum things up, the main idea was to maintain an email like system, where the private information broadcasts over a network, but only to the select authorities.
Therefore, if you asked the question “what is the meaning of cryptocurrency”, then the answer is simple. Decentralized mode of currency exchange is what defines crytpos.
History of Cryptocurrency
People believe the cryptocurrencies to make them super-rich overnight. However, very few are aware of the fact that history of cryptocurrency is richer as compared to such monetary gains.
So, let’s start with a shock! Did you know that cryptocurrencies are actually bi-products of another invention?
Bi-Products of another Invention
An alias of Satoshi Nakamoto, who is the unknown inventor of Bitcoin, never intended to invent a currency. Infact, the thought behind Bitcoin was to be an electronic cash system that has no central governing authority.
The concept of Bitcoin was not a really admired one, owing to the fact that many such actions had failed in the past. However, Satoshi marked a new feat in the history of cryptocurrency by using a decentralized approach.
The innovation sparked the fuel to create something known as a Bitcoin Blockchain in the history of cryptocurrency.
A Successful Bi-Product
Eventually, the concept developed and more and more companies utilized this idea for their own personal uses. A few notable ones are Ethereum (application-based) and Zcash (Private).
Another interesting fact is that most of the people are surprisingly keen about studying the Bitcoins instead of the Blockchain that was actually the main thing Satoshi Nakamoto wanted to invent!
What Is Cryptocurrency Used For?
The third most interesting question that we face in our lives is the basic use of the cryptocurrencies. There is a huge majority of the people on this planet that still don’t know how a computer works, so expect such a question every now and then from the people!
In the most basic terms, the basic role of a cryptocurrency is as a digital asset, or more precisely a digital currency, alternative currency or virtual currency.
Why Cryptos are a currency?
Imagine James has 100 bucks. In his mind he will have an amount which he possesses, and he is not bound to give it away until some specific requirements are fulfilled.
Similarly, if James possesses a crypto (let’s say one Bitcoin) all of the conditions are same, except that the tangible feel of the currency. So, we can classify cryptos as a currency.
As Digital/Virtual Currencies
The cryptocurrencies are digital currencies. That means that they have no physical existence and they only exist over a network (the Blockchain). They are not coins flying here and there but mere entries in a database that we cannot change without fulfilling specific conditions.
So, we call the cryptocurrencies as digital currencies.
Latest cryptocurrencies Prices
Businesses and enterprises use the cryptocurrencies as alternative currencies as alternatives to the centralized system. In that system, the businesses might have to funnel in some high amounts in the shape of taxation and fees or expenses. However, that is not a case with the cryptocurrencies.
These are complementary currencies that businesses can hide from this system and rack up until necessary. So, the next time when someone utters the word altcoin in front of you, you’ll know that they are actually talking about alternative coins (or alternative currencies).
If you don’t happen to be a businessman, but a person with a golden thumb with tech. Then, you might be able to lend the thinking power of your PC to sort out a few blocks on the Blockchain. The blockchain works upon compensating every such person (we call them miners) with shiny cryptocurrency.
Consider a huge variable, where your teacher awards you for guessing its value. On the other hand, for every guessed value, more variables add into the formula. This is what happens in the blockchain. Rewards are distributed upon completion of a block. On the other hand, a new block which is more complex from its predecessors adds into the blockchain.
So, to some people, it is not a business currency but a potential mine from which they can extract some ledger entries with knowledge worth bucks!
Types of Cryptocurrency
This is the most interesting question you might be having in your mind. You might be thinking that if this is all cryptocurrencies are about then you are wrong!
Reflect upon what I said while talking about Bitcoin in the history of cryptocurrency. I even managed to mention a few! So, what I deduce from those names is that the Blockchain is more diverse than we can possibly think of.
As the environment of decentralization takes the mainstream, more and more businesses will join in and everyone will try to implement their own unique use of the Blockchain network.
Hence, we will experience different algorithms over the Blockchain.
Types of Cryptocurrencies
Interestingly, many different types of cryptocurrency are already seeing the face of the market. And these currencies group up on the basis distinct algorithms. These different algorithms determine the complexity of work, and the requirements of machines to process them.
This system is interestingly similar to the system of Boxing, where a lightweight system has his own champions and competitions; whereas, in the middleweight and heavyweight there are different people. So, we divide the Blockchain into different categories depending upon the potential gains of the business that are behind the different currencies.
From the perspective of their algorithms, the following different types of cryptocurrency are there:
Dagger Hashimoto – Ethash Algorithm
SHA-256 or Secure Hash Algorithm creates a unique 256-bit encryption key for the protection. In this system, the blocks generally take 6-10 minutes to complete a single block.
The system uses GH/s (Giga Hashes per Second) for processing in this Blockchain Algorithm. It is equivalent to 1 billion Hashes in a second.
The Hash is a fixed-size index that we use to retrieve items from a database.
Bitcoin (BTC), BitcoinCash (BCH), Peercoin (PPC), 21Coin (21), Unobtanium (UNO), Namecoin (NMC) are a few coins that work on this algorithm.
The Scrypt Algorithm requires large amounts of memory but is simpler and quicker than SHA-256. It’s hash rate is measured in KH/s (Kilo Hashes per Second) meaning one thousand hash computations in a second. Another important feature of the Scrypt is that it does not depend upon the previous blocks in the Blockchain for new blocks.
Some of the most notable coins that use Scrypt Algorithm are the Litecoin (LTE), Dogecoin (DOGE), Novacoin (NVC) etc.
Meaning of SHA-256
Calculated in MH/s (Mega Hashes per Second), the X11 was developed by Evan Duffield. There are 11 scientific hashing algorithms in this system for the proof of work.
The processing power required for this Algorithm is a million hashes within a single second.
If you obtain this power, you are likely to mine Dash (DASH), CannabisCoin (CANN) or StartCoin (START).
This algorithm was designed to be the best suitable for the CPUs. Unlike the Scrypt Algorithm, the Cryptonight depends upon all the previous blocks for new block.
It is measured in H/s (Hash per Second).
Some notable coins using this algorithm are Monero (XMR), Bytecoin (BCN) and Dashcoin (DSH).
Dagger Hashimoto/ Ethash Algorithm
It is the combination of the Dagger and Hashimoto algos developed by Vitalik Buterin and Thaddeus Dryja respectively. Dagger is actually easier alternative of the Scrypt algorithm, and Hashimoto limits the mining processes.
It is called Ethash Algorithm because it is used for mining Ethereum (ETH), Ethereum Classic (ETC) and Expanse (EXP).
World of Cryptocurrencies
The world of cryptocurrencies is very diverse. Given the proper conditions, this method of digital assets’ trading can be very influential and insightful.
Going through this guide will have thoroughly given you the explanation about the legit nature of the cryptocurrencies and how they are benefiting people. The fact that they require money to be processed (in terms of bills) is what that defines their price. Hence, they are a good investment in the present times.