What is cryptocurrency

What

Cryptocurrency is a digital asset that is used as a medium of exchange within the framework of a peer-to-peer economic system. This system uses cryptographic methods to verify the authenticity of existing tools and to create new ones.

At a time when centralized banking systems are controlled from a single source, cryptocurrencies are decentralized and are controlled mostly automatically, based on predetermined interaction protocols. In some cases, these protocols can be changed, but not on a generally accepted scale.

Anyone who has access to the Internet can connect to a network using cryptocurrencies. Moreover, in some situations, even a radio signal is sufficient.

In addition, transactions with cryptocurrencies are more efficient, since they are making without intermediary services. It is also worth considering that each transfer of funds is irreversible, unlike reversible transactions made by credit card companies. And only in some very serious cases a general “rollback” of the system is possible, returning funds to the owners. In the history of the use of cryptocurrencies, this cases were extremely rare.

New units, usually called "coins," are issued automatically - based on existing protocols and cryptographic evidence. Moreover, usually, the maximum number of coins is limited in advance. And the “mining rewards” of the new storage units decrease over time. The limit amount is usually well-known information. So, for example, for the Bitcoin network, the set limit is a figure of 21 million coins. It is still not achieved, despite the popularity of bitcoin.

All cryptocurrencies are considered decentralized, since the protocols governing their use and activity reports are stored on many computers around the world. However, it should be borne in mind that the degree of decentralization in different cryptocurrencies may differ. For example, some of these funds are issued by private companies and funds, which, by virtue of pre-established protocols, have a greater impact on their turnover.

The basis of the cryptocurrency system itself is blockchain technology. This is a linear chain of blocks of encoded information connected by cryptographic methods. Each individual block carries information about transactions for a certain period of time, as well as a link to the block preceding it. All the resulting chain is stored on many computers around the world, which makes it difficult to deliberately make corrections to it and the accidental occurrence of failures and distortions.

Bitcoin is considered as the first such decentralized cryptocurrency - a system created in 2008 by a certain developer or a group of authors operating under the pseudonym Satoshi Nakamoto. The main idea was just to create a network of electronic payments based on mathematical calculations, encodings and cryptography.

At the current moment, there are more than a thousand different cryptocurrencies, many of which differ significantly from each other. Including at the level of basic protocols, validation algorithms and other fundamental points. Their popularity in society also varies quite significantly, however, the global trend indicates a steady increase in interest to cryptocurrency in general. And not only at the level of individuals, but also at the international level.