Introduction to cryptocurrencies
The creation of virtual money has led to the emergence of the cryptocurrency market. A lot of decentralized programs are created on the blockchains that are available. Nowadays, something that has been proposed only as an idea for several decades is being implemented on a large scale.
Definition of cryptocurrencies
Cryptocurrency is a type of digital currency that is automatically recorded by a payment system. Each cryptocurrency is based on blockchain technology. The issuance and regulation of cryptocurrencies is not controlled by any central authority. Banks are not involved in verifying transactions.
Cryptocurrency payments are exclusively digital and do not involve transactions with the money we are used to. Cryptocurrencies are stored in digital wallets, and all transactions are recorded in a ledger. Cryptocurrency is not a tangible object, but a key that can be used to move a unit of measurement between persons without the help of a third party.
History of cryptocurrencies
Cryptographers first discussed the possibility of creating an information network in the 60s. In the 80s, the first practical steps were taken in this direction. The information network was used to exchange brokerage data required for exchange trading. At the same time, the idea of creating a digital currency emerged. The concept was valuable because it made it possible to quickly buy stocks and financial assets. Cryptographers from America took up the idea. They described the principles of the digital payment system and proposed "electronic cash" protocols.
In 1990, DigiCash was founded to develop and implement the eCash system. The system was distinguished from today's cryptocurrencies by its centralized management. In 1988, the system went bankrupt, but the idea was still relevant and continued to arouse interest.
In 1997, the HashCash system was introduced. It was characterized by resistance to spam and various attacks. Later, the algorithm for controlling digital payments was improved. This technology became one of the concepts for the development of the first blockchain. In 1988, two digital projects were launched in parallel: B-money and Bit-Gold.
Blockchain technology and cryptocurrencies are the result of the work of a group of people, but the implementation of the modern system was made by an anonymous developer Satoshi Nakamoto. His real name is still unknown, but there is speculation that a group of people is hiding behind his pseudonym. In 2007, Nakamoto began to create the principles of working without central control. In 2008, a document describing bitcoin was published. The following year, the first bitcoin purchase was made. 2010 saw the release of the final version of bitcoin and Satoshi Nakamoto's departure from the project.
Types of cryptocurrencies
There are thousands of types of digital money. Let's take a look at the most popular ones:
- Bitcoin - created in 2009, it became the first cryptocurrency in history and still holds a leading position.
- Ethereum is a platform with its own cryptocurrency, Ether, created in 2015. It is the second most popular.
- Litecoin is a digital currency similar to Bitcoin, but with faster payments and processes that allow for more transactions.
- Ripple is a system founded in 2012 and used to track various transactions. The developer of the platform worked together with banks and other financial institutions.
Cryptocurrencies are not the same as bitcoin. To distinguish them from the original, the name altcoins was created.
Digital assets
A digital asset is any valuable object that is owned in a digital or computerized form. This includes virtual machines, servers, applications, and any data. Such assets are important in planning and digital transformation. They enable business processes and support operations.
Decentralization
The term means the management of any platform as a project without a specialized body, i.e., not in a centralized manner. A project will be considered decentralized if there are no intermediaries or third parties (managers or administrators).
Cryptography
Cryptography is a method of protecting information using encoded algorithms and signatures. Information can be in storage, transmission, or use. Cryptography uses some low-level algorithms. Tools include: encryption algorithms, digital signatures, and other functions.
Blockchain
Blockchain is an advanced database mechanism that allows for the open exchange of information within business networks. A blockchain database stores data in blocks that are linked together by a chain. Blockchain is a technology that is constantly evolving and is used in various fields.