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What is Cryptocurrency? Introduction of Cryptocurrency

by John Bhatt
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In last one year, if World has concern in something, those are two things. First is Cryptocurrency which almost every nation and every computer user is aware of. Second one is the relation between USA and North Korea.

As soon as Donald Trump is elected president of USA, he started arrogantly with changing many policies in immigration. North Korea is showing its Nuclear power and anytime, the two nation might attack each other which will cause a possible World War 3. By the way, We are not talking about this.

Cryptocurrency is the second thing the world is talking about. Many countries banned Cryptocurrency. Many of them created own version of state owned cryptocurrency. Some countries have created laws and regulations on Cryptocurrency.

What is Cryptocurrency?

Cryptocurrency is the combination of two words. Crypto (cryptography) and currency. Well everyone knows what currency is,

Lets understand, what is cryptography?

Cryptography or Cryptology is the method of communication where only sender and receiver understand the message. Encryption and Decryption happen at both senders and receivers end  respectively. In computer and electronic communication, when you send some message to other user, the data packet travels through many networks. If the message is sent as plain text, the transporter or the hacker may read the message and cause lots of loss and crimes like theft and attacks.

To prevent this, messages are encoded using some algorithms and then upon receiving message, the recipient has to to provide decoding key. Until the key match, the message remains in unreadable format and neither a human nor any machine can understand the message.

Why Crypto-Currency?

In current scenario, the Currencies are controlled by Government of Central banks of nation. Every nation has their own currency and the value of that varies accordingly. Also, all currencies are not accepted at everyplace on other country.

Also, to exchange currency, you have to rely on financial institutions like Bank or Money Exchanges. They have timings and many not available at the moment when we require money. To receive currency from one person to other, you should have a bank account, a valid ID and then someone can sent money. Due to policies and cross-border communication system (International protocols as well as different mechanism used by sender and receiver) the process becomes slower.

In a normal situation, if you are sending money from USA to India, it may take 2-3 days and the charge your banks will take is too much high.

To prevent and get rid of this problem, idea or virtual currency arise. First time, in 1998, theoretical approach to this came into existence. There will be computer network which will handle this. No individual, no organization. Its working mechanism is almost similar to Torrents.

Some fundamental principles of Cryptocurrency.

  • There will be public ledger,
  • Other persons will approve transactions who will be on Internet.
  • There will not be any authority.
  • Very less charge.
  • De-centralised, no one can steal your money like physical currency.
  • Human will not interact in this process, computer will solve mathematical equations relating to transaction and if calculation is successful, currency will be transferred successfully and some percentage of the amount will be awarded to computer who approved transaction.

Types of Cryptocurrency

Based on the nature of Cryptocurrency, we can divide them in two types.

Mineable Cryptocurrency:

These are the most trust-able currency because they rely on Proof of Work system. Cryptocurrency Mining is term used for system where reward is given to computer authorizing transaction. Many software and CPU solve these problems using different algorithms. Some example of Mineable Cryptocurrency are  Bitcoin, Monero, Ethereum are major names of Mineable Cryptocurrency.

Cryptocurrency Mining

Non-Mineable and Pre-Mined Cryptocurrency:

These are coins which are already mined by Developer. These rely on Proof of Stake mechanism. Relatively these are controlled by some person and organization and have less trust value as compared to Mineable Cryptocurrency. Some of the famous pre-mined Cryptocurrency are Ripple, Nem and others.

Further, In coming posts, we will write in detail about mining digital currency. Which digital currency worth investing time and money and more details.

Terminology Related to Cryptocurrency

Finally, lets be familiar with some terms related to Cryptocurrency. Below are most used words in digital currency market.

  1. POS – Proof of Stake
  2. POW – Proof of Work
    1. Satoshi – Smalles unit of Bitcoin (most famous Cryptocurrency)
  3. Address – Encrypted username of account number of Cryptocurrency.
  4. Mining – Process of searching and solving blocks among Blockchain registers.
  5. Miner – The hardware (Computer) which mines digital currency.
  6. Blocks – Page of Ledger.
  7. Blockchain – Data system which allows creation of ledgers of de-centralized currency.
  8. Hashrate – This is the rate at which calculations required to authorize transaction occur. More the hashrate, more blocks you solve and more reward you get. So fastest processing computer generated more revenue in case of Mineable coin.

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