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Cryptocurrency
Announcing the first release of Bitcoin, a new electronic cash system that uses a peer-to-peer network to prevent double-spending. It’s completely decentralized with no server or central authority.
– Satoshi Nakamoto, 09 January 2009, announcing Bitcoin on SourceForge.
Cryptocurrency is a subset of digital currency, which acts as a medium of exchange amongst two parties. It is known as crypto-currency because of the utilization of cryptography in securing its transactions. There are various cryptocurrencies including Litecoin, Dash, Ethereum, Ripple, and the currently most popular one Bitcoin.
You can’t stop things like Bitcoin. It will be everywhere and the world will have to readjust. World governments will have to readjust
– John McAfee
Cryptocurrency enables trustless and anonymous transactions since it does not involve any third party - there is no central bank. Instead, a blockchain keeps a ledger of transactions across a public network of computers. Blockchains are append-only, meaning nobody can change past transactions. Unlike normal currency, cryptocurrency is infinitely divisible and can be exchanged in tiny fractions. For example, transactions can amount to 0.00007 BTC or even lower. Currently the smallest amount of bitcoin ever recorded on the block chain is 0.00000001 BTC also called satoshi (in honor of the creator of Bitcoin, Satoshi Nakamoto).
Every cryptocurrency has three layers:
- Protocol - The source code that directs the interaction of the network and various clients (aka core)
- Network - The group of computers that maintain and update the decentralized ledger (aka miners)
- Application - The software that allows users to make transactions (aka wallet)
Many cryptocurrencies such as Bitcoin can be earned by validating transactions on the network. This process of validation is called "proof of work" and consists of mathematically guessing a random numbers (usually less than a certain determined value or "difficulty") to attempt to match the blockchain's irreversible cryptographic hash function. As more transactions are validated (and rewards for validation are collected) over time, the difficulty of finding the correct hash increases. An increase in the popularity of cryptocurrency mining over the past few years has outpaced the development of the average computational power of a household computer, so in order to mine effectively, one requires a computer (or computers) with especially powerful graphics cards (such as the Nivida GTX 1080) or specialized cryptocurrency mining equipment (such as the Fast-Hash One or CoinTerra TerraMiner IV). It should also be noted that, because of drawbacks of proof-of-work validation (such as energy inefficiency), some cryptocurrencies are exploring alternative algorithms such as "proof of burn".
Some people invest in cryptocurrency on exchanges such as Binance, Bitrex, or Coinbase. The market peeked in January of 2018.
Background history on origins of cryptocurrency:
Blockchain origins story Cypherpunks, crypoanarchists, and libertarians paved the way for the right to privacy and deregulating the government's control and diminishing individual citizen's autonomy.