Let’s rewind a bit. Shall we?
We have all seen (and experienced) evolution before and in fact still experiencing. Look at your phones, computing machines, cars, even toasters. How they were Vs. How they are Vs. How they will be!
The same evolution brings us ‘cryptocurrencies’ – It simply is an evolution of money transactions.
First things first. Why the so called ‘Satoshi Nakamoto’ created this system?
‘Decentralized payment system’ is the genesis of cryptocurrencies.
The idea of ‘transparency’ in transactions was popped up in 1990s’. People wanted to get rid of middlemen in their transactions (For instance, bank acts as a middle man when you transfer money to a friend). This resulted in several attempts of creating digital cash running on a peer-to-peer system. Many desired, but Satoshi is the only one who came up with a working system and here we are sending/receiving money in the most possible open way.
Yes, side product:
Only a few people know cryptocurrencies emerged as a side product of digital cash.
As we mentioned above, ‘Satoshi Nakamoto’ aimed to develop “A Peer-to-Peer Electronic Cash System”. (Like we share files between each other); not a currency. But the biggest problem in peer-to-peer transaction system is to prevent ‘double spending’. i.e., preventing one entity spending the same amount twice. Usually, a centralized server takes care of this job by noting down the statements, but here there is no centralized server. Nakamoto solved the puzzle and gave us a solution – Cryptocurrency is a part of a solution!
How it works?
When a user makes/requests a transaction, it should be validated by miner and then passed through the entire network in order to complete the transaction.
If Bob gives X Bitcoin to Alice,
1.A transaction gets initiated and is signed by Bob’s private key.
2.This transaction is broadcasted to all the peers in network (Transaction is known almost known immediately by the whole network).
3.Then, confirmation is kept on hold,
4.Now, miners only can confirm transactions. They take transactions, solve cryptographic problems, add them to an existing block chain (Permanent and incorruptible), stamp them as legit and spread them in the network. For this job, they get rewarded by a token of cryptocurrency (for instance, bitcoins).
Blockchains are digital ledgers growing continuously with a list of records, called blocks. A block typically contains a hash pointer as a link to previous block, a timestamp and transaction data. They are linked and secured using cryptography.
So, every peer in the network has the history of all transactions and knows the balance of all accounted associated in the network. Instead of a bank’s centralised server, all the computers in the network stores transactions which prevents double spending or any other forms of data corruption.
Miners are people fighting to win cryptocurrency by solving complex mathematical problems with the aid of their computers
Logically, anyone can be a miner. Since cryptocurrency has no centralized authority to delegate this task, there is a need of some kind of mechanism to prevent one ruling party from abusing it. So, satoshi sets the rule that the miners need to invest some work of their computers to qualify for this task. They have to find a hash – a product of cryptographic function that connects the new block with its predecessor. This is called ‘Proof-of-Work’. And, it is imperative that miners can only solve certain amount of cryptographic puzzles so that the amount of cryptocurrencies created is always under limit.
Also learn: Why Data is the creator of AI?
After confirmation no one can reverse the transaction. What gone is gone permanently.
Neither transactions nor accounts are connected to real-world identities. You receive bitcoins on so-called address, which are randomly seeming chains of around 30 characters.
Fast and Global:
Transactions can be made globally. It takes nearly same amount of time to send cryptocurrency to your neighbor or to someone on other side of the world.
A cryptocurrency network is more secure than Fort Knox.
Top 3 Cryptocurrencies to invest in 2018:
There are around 700 cryptocurrencies (Like bitcoins) exists as of now. So, it is important to know which ones has the potential to disrupt transaction industry in global-scale.
The most popular and valuable crytocurrency till now with a huge market potential as more countries and tech giants are planning to accept bitcoins as a payment system.
Market Cap in USD – $ 0.237T
Value in USD – $ 14,099.02 per bitcoin
Where to start – Coinbase.com,
An open source platform based on blockchain technology enables developers to build and deploy decentralized applications.
Market Cap in USD – $66.06B
Value in USD – $690.08
Where to start – Coinbase, Plus 500, localethereum.
Ripple is both a payment network (RippleNet) and a currency (Ripple XRP). RippleNet connects banks and big institutions and allows them to transfer money and assets through the network. Here transactions are recorded on the decentralized XRP ledger.
Ripple XRP is the currency used in the payment network for all kinds of transactions. Reportedly, the fastest currency as it takes only 4 seconds to process.
Market Cap in USD – $42.3B
Value in USD – $1.09
Where to start – ripple.com, Kraken, GateHub.
Values and Market Cap are subjected to continuous change and are referred on the publishing date
The Future or The Bubble?
The cryptocurrencies have experienced unbelievable ups this year with a few notable downs recently. Around 80% of wall street economists believe ‘Bitcoin is a bubble’ .On the other hand, blockchain technology is presumed to revolutionize Internet. With countries and vendors adapting bitcoins, it is still hard to confirm bubbling effect.
Here are a few advices you should pay heed to:
Invest what you can afford to lose.
Pay attention to the graphs – A graph depicting ups and downs of cryptocurrencies and a graph plotting the adaption and peers rising in the network of cryptocurrencies.
Do not invest without considering the economic fluctuations expected to hit in the near future.