The past few weeks have created a lot of buzz around the term “cryptocurrency.” If you are one of those who needs good amount of clarity the most important thing about cryptocurrencies, worry not! We will have you updated with the latest economic trends in the market. After you‘ve had a run through, you‘ll know better than most of the human beings.
Now, cryptocurrencies have went on to become a worldwide buzz, and a lot of people know about it today. Though the notion is kind of nerdy and not well-understood by a hell lot of people, banks, governments and various other companies are fully aware of the prominence of such currencies.
“ By diligently adding in certain missing pieces that were initially forgotten, Satoshi finally came up with what’s now called the digital cash. ”
In the year 2016, it would have been difficult for you to find a major accounting company, a well-known software company, a prominent bank, or government agencies that did not research on cryptocurrencies, publish an article about it or start some kind of blockchain-project.
So what is this cryptocurrency? And how has it surfaced as a side product of digital currency?
Not a lot of people know that cryptocurrencies have surfaced as a side product of some other invention altogether. Satoshi Nakamoto, is the supposed unanimous inventor of Bitcoin, and he never actually aspired to invent a currency. Bitcoin is the first and the most important cryptocurrency to exist so far.
Satoshi Nakamoto first declared about Bitcoin in the late 2008. Satoshi admitted that he create “A Peer-to-Peer Electronic Cash System.”
He didn’t have anything specific in mind to invent, but just something that plenty of people couldn’t invent in front of digital cash.
Eventually he declared the first ever release of Bitcoin, which went on to become a new electronic cash system. This technology made use of a peer-to-peer network in order to avert double-spending. So, this technology works on a fully decentralized status without using any server or central authority.
The most essential ingredient of Bitcoin’s invention was that Satoshi found a way in which he could build a decentralized digital cash system. This was an important invention because in the nineties, a lot of people have made several attempts to develop some or the other form of digital cash, but they all failed due to some or the other reason.
After witnessing how all the centralized attempts have been failed in order to create a decentralized economy, Satoshi gave in his tooth and nail to formulate a digital cash system without the need of any kind of central entity. He wanted to create a Peer-to-Peer type of a network for file sharing.
His decision eventually led to the birth of cryptocurrency. By diligently adding in certain missing pieces that were initially forgotten, Satoshi finally came up with what’s now called the digital cash. Now why did he create a digital currency is a bit technical and complex. However, once you understand this concept, you‘ll know more about cryptocurrencies than most people do.
In order to obtain any kind of digital cash, you need a payment network that consists of balances, accounts, and transaction. A massive problem that every payment system faces is preventing the so-called double spending. They need to make sure to prevent that one commodity, which doubly spends the same amount. Mostly, this activity is managed by a central server that maintains all the records and balances.
A decentralized network does not require this sort of server. So, it is important for every single subsistence of this network to do its duty. Every peer in this network must have a list with all the transactions in order to watch out if the future transactions are valid or are they just an attempt to double the spend.
Can you guess how these entities can keep a consensus of all these records?
Now, if the peers of the network disagree on even a single, minor balance, then everything falls apart. The peers need a complete consensus. Usually, it again takes a central authority for declaring the correct records of balances. But if you don’t have any central authority then achieving a consensus can get tricky?
Nobody was aware of all this know until Satoshi made an appearance. Factually speaking, nobody could even believe that something like this was even possible.
Satoshi’s mind blowing innovation was to retrieve a consensus without the presence of a central authority. And boom, cryptocurrencies turned out to be the solution for it.
What are cryptocurrencies really?
If you strip off all the buzz around cryptocurrencies and just use a layman’s definition, you will see that cryptocurrency is nothing but just limited entries in a database that no one has the authority to change without fulfilling certain conditions. Yes, this sounds pretty damn simply! This is exactly what digital currency means.
For instance, the money that’s on your bank account: do you think it more than just some entries in a database that can be changed only under certain conditions? Even the physical coins and notes are nothing but limited entries in a public physical database.
In short, money is nothing but a verified entry in a database of accounts, balances, and transactions.