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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.
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. Additionally, 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.
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)
If you want to earn cryptocurrency through mining, it can be done through solving mathematical proof-of-work problems that validate transactions. Blockchain uses the concept of irreversible cryptographic hash function which consists of guessing a random number (usually less than a certain value) to solve the problem for transaction validation. You will require machines with high processing power to be able to solve these problems. Computers with a high-end graphics card or an application specific integrated circuit (ASIC) designed especially for cryptocurrency mining are able to solve these puzzles most efficiently.
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.