Cryptocurrency is a digital or virtual currency that is designed to act as a medium of exchange. It uses cryptography to secure and verify transactions, as well as control the creation of new units of a specific cryptocurrency. Essentially, cryptocurrencies are limited to the value calculated in a database that no one can change unless specific conditions are met.
History of Cryptocurrency
In the 90s, besides the explosion of digital technology, this was also a period of great recession crisis. This prompted many people to attempt to create a digital currency, among them Flooz, Benz and DigiCash were the most prominent names of their day, but eventually fell. .
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Notably, all of these systems use a trusted third party approach, meaning the companies behind have verified and facilitated transactions. However, due to the failure of these companies, the creation of a digital currency system was forgotten.
It was not until early 2009 that an anonymous developer or a group of programmers called Satoshi Nakamoto introduced Bitcoin. Satoshi describes it as a peer-to-peer, decentralized cryptocurrency system, with no associated servers and no central control agency equivalent to peer-to-peer networks for file sharing. .
One of the most important issues that any payment network faces is fraudulent spending or double-spending - a form of fraud that uses two different transactions to spend. same amount twice. To prevent this, the traditional financial form used a trusted third party - a central server - to keep records of balances and transactions. However, this method always requires a competent authority to control the money as well as hold all your personal information.
In a decentralized network like Bitcoin, there is no need for a central server that each individual participates in, via Blockchain - a public ledger of all transactions that have ever happened in the network. Available to everyone. As a result, anyone can see the account balance, can check the wallet and transactions of the other person or anyone they know the wallet address.
Each transaction is a file of sender's and recipient's public keys (wallet addresses) and the amount of money transferred. Transactions also need to be signed by the sender with their private key. All this is just a basic code. After that, the transactions will be transferred within the network as same as other transactions.
In the cryptocurrency network, only miners can confirm transactions by solving puzzles. They make transactions, mark them as legitimate and transfer them away. This transport process will have confirmation from the nodes (nodes) and each node will be gradually added to the database. Once the transaction is confirmed, no one can counterfeit and reverse the information. The miners will receive a reward and this is the transaction cost that the trader pays them.
Basically, any cryptocurrency network is based on the absolute consensus of all participants about the legality of the trading balance. If the nodes of the network disagree on a single balance the system will malfunction. However, there are many rules built in advance to prevent this from happening.
What is cryptocurrency used for?
In the past, finding a store that accepted cryptocurrencies was extremely difficult, if not impossible. However, the situation was completely different now.
There are many traders - both online and offline - that accept Bitcoin as a form of payment. From online retailers like Overstock and Newegg to small local shops, bars and restaurants. Bitcoin can be used to pay for hotels, flights, jewelry, applications, computer components and even university degrees.
A number of other digital currencies like Litecoin, Ripple, Ethereum, etc. have been widely accepted. Or you can use Bitcoin to exchange for fiat currency. Moreover, there are gift card sites like Gift Off, accepting about 20 different cryptocurrencies. Through gift cards, you can almost buy anything with cryptocurrency.
Cryptocurrencies are high risk investments.
Many people believe that cryptocurrencies are a high profit opportunity if they know how. Indeed, there are many stories of people becoming millionaires through Bitcoin investments. If at the beginning of 2017, the price of a Bitcoin was only $ 1,000, by the end of the year, the price would have reached a maximum of $ 19,000 / BTC. Let's say you only bought 5 BTC for $ 1000 (over 100 million) until the end of the year if you sold at the peak of 19,000 USD you had over 95,000 USD more than 2 billion!
Ethereum is the cryptocurrency after BTC recorded the fastest increase among digital currencies. Since May 2016, its value has increased by at least 2,700%. When it comes to all cryptocurrencies combined, the market capitalization has increased by more than 10,000% since mid-2013.
However, cryptocurrencies are a high risk investment. Market value with fluctuations, Moreover, it is not yet recognized, so there is always a risk of being outlawed in certain jurisdictions.
If you decide to invest in cryptocurrencies, then Bitcoin will undoubtedly be one of the top choices. However, in 2017, its market share in the cryptocurrency market dropped significantly from 90% to just 40%. With such abnormal fluctuations, intangible Bitcoin has become a form of risky investment that you should consider before investing.
Mining tools are the most important part of any cryptocurrency network, similar to mining transactions being an investment. Basically, miners are providing a service to their community. They contribute computational power to solve the complex puzzles needed to validate a transaction and record it in a public ledger known as Blockchain.
One of the interesting things about mining is that the difficulty of the puzzles is constantly increasing, correlating with the number of people trying to solve it. So, the more popular the cryptocurrency, the more people try to mine it, the harder it will become.
In the past, you could mine Bitcoin very easily with just a desktop computer or even a powerful laptop. Currently, this game is only for corporations exploiting in the form of industry, individuals can hardly compete. Because as mentioned before, the more popular the coin, the more difficult it will become and the amount of money received will decrease. For example, when Bitcoin was newly created the reward for successful mining was 50 BTC. Now, the reward stops at 12.5 Bitcoin. As of November 2017, nearly 17 million Bitcoin was mined and distributed. However, as the reward becomes less and less, each Bitcoin mined becomes more and more valuable exponentially. All of these factors make mining cryptocurrency a hardware race and become more and more difficult.
Accept payment (for businesses)
If you are a business owner, looking for potential new customers, accepting cryptocurrencies as a form of payment can be a solution to help you easily compete. The interest in cryptocurrencies is increasing, making the number of cryptocurrency ATMs located in many places around the world with the number of 1,800 ATMs in 58 countries.
In the US, Bitcoin and other cryptocurrencies have been recognized as convertible virtual currencies, meaning accepting them as a form of payment is exactly the same as accepting cash, gold or gift cards.
Legality of cryptocurrencies
As cryptocurrencies become more and more mainstream, law enforcement agencies, tax authorities, and regulatory agencies around the world are trying to regulate the concept of cryptocurrencies, as well as establishing star rules. for them in accordance with applicable laws and regulations.
Learn more about e-wallets and how to create a storage wallet:
- What is a digital wallet? Things you need to know
- Myetherwallet wallet? How to create wallet containing ethereum
With the advent of Bitcoin this is seen as a new breeze in the financial market because of the payment model they created. Decentralized, self-sustaining cryptocurrencies do not exist in any physical form or form, and are not controlled by any single entity, always causing many state regulators have to be cautious to stop.
Due to its decentralized nature and the ability to use it anonymously, many authorities around the world are worried about the development of cryptocurrencies for illegal services, money laundering and hiding. tax. Therefore, many countries around the world have considered the circulation of cryptocurrencies as an illegal form. But there are also many countries that support this currency, viewing them as a plan to save the typical economy like Venezuela
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Author: Tin Nguyen
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