A Comprehensive Guide to Understanding Blockchain and Cryptocurrencies
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A Comprehensive Guide to Understanding Blockchain and Cryptocurrencies

December 3, 2020      Guest Author

The name Bitcoin has become a household term and has come to be used interchangeably with cryptocurrency. Bitcoin is only one of the kinds of cryptocurrencies available in the world today, but it is the most popular.

Even though people have heard of terms such as cryptocurrencies and blockchains, not many truly understand what they mean. With more and more individuals and firms turning to the crypto world to make investments, conduct transactions and get profits, it is crucial that you have a good knowledge regarding cryptocurrencies. This article will help you understand more about the world of cryptocurrency and the technology involved.

blockchain-scalability

What is a cryptocurrency?

Cryptocurrency is a digital currency in which each token is made up of a line of code. These digital coins can be transferred from one party to another. It can be done without the involvement of a bank or another intermediary. The cryptography involved in the creation of the currency makes it nearly impossible to create counterfeit coins.

Since they are not associated with any form of authority, cryptocurrency users enjoy massive freedom and very little to no regulation. Most governments in the world are weary or cryptocurrency since, unlike other forms of fiat, there is no bank or regulatory authority to control its activities.

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This lack of regulation and control also makes the crypto world an ideal playground for criminals. Everything from money laundering to weapons procurement and smuggling has been known to take place via cryptocurrencies, earning them a bad reputation.

When used in the right way, cryptocurrencies are a great mode of transaction that makes things simpler and eliminate the necessity for third-party involvement.

Cryptocurrencies are considered to be too unpredictable and volatile. The currency’s value always depends on what the recipient intends to pay for it. Due to this reason, the value of cryptocurrencies can jump between extremes. One day it might be $10,000 and the next it might be $3000. A Cryptocurrency Heat Map can provide you with information regarding each cryptocurrency’s market value.

The most popular kind of cryptocurrency, known as Bitcoin, first emerged back in 2009. It was introduced by someone with the pseudonym Satoshi Nakamoto. A pre-determined value for the maximum number of bitcoins that can be created in the world was set when Bitcoin was first launched. With around 18.5 million bitcoins mined already, the number is steadily approaching a maximum of 21 million. Bitcoin mining is the process by which your computer solves a complex math problem and verifies a transaction. The mining process also provides the miners with crypto tokens. This reward was set in place to encourage miners to validate the transactions that take place in the crypto world.

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After Bitcoin, Litecoin and Namecoin emerged in 2011. Litecoin is considered a spinoff of the Bitcoin. With a more significant number of coins and faster speeds, Litecoins are considered by some to be better than Bitcoins. Ripple and Ethereum came out in the years 2013 and 2015 respectively and have made their mark as some major players in the cryptocurrency world.

Blockchains

Cryptocurrencies make use of blockchain technology. Blockchains are not limited to cryptocurrencies and have a wide range of applications.

Blockchains are essentially like massive databases. The information in these particular databases is stored in the form of blocks. These blocks are all connected to each other. When someone carries out a transaction using cryptocurrency in a blockchain, it goes to multiple computers all over the world.

These computers will then go through a process called “hashing” to solve complicated maths problems and verify the validity of that transaction.

Once the transaction has been verified, the information is then turned into a block and linked with other blocks. All these blocks then constitute a comprehensive history of all the transactions that took place.

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Cryptocurrencies use blockchain technology to store large amounts of data regarding the transactions that take place. This blockchain is made up of several computers belonging to many different individuals or groups. Thus, blockchains enable the decentralization of cryptocurrencies.

Due to such a decentralization, anyone can view the transactions that took place on the blockchain. With the right software, you can even spectate the transactions that are taking place in real-time.

Since blocks in the blockchain are added linearly, each block will be awarded a position on the block. Once a block has been added, it is nearly impossible to make any changes regarding the content. If a criminal tried to alter the block and steal someone’s money, only his blockchain would appear different.

When the others check their blocks against each other’s, the criminal’s will appear different. To successfully carry out a task like that, the criminal would require enormous resources and influence and the chances of success are pretty low. This makes the blockchain extraordinarily secure and safe for the users.

Summing Up

Cryptocurrencies and blockchain technology will soon become an inevitable part of people’s lives. They will make transactions global, less expensive and faster. With blockchain technology and complex algorithms, there is also increased security for your funds

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