Today cryptocurrencies have become a global phenomenon known by most people. Satoshi Nakamoto invented Bitcoin in 2008 as a peer to peer electronic cash system. For the digital cash transfer, you need a payment network with accounts balances and transactions.
But one major problem every payment network has to solve is to prevent double spending that is to prevent one entity from spending the same amount twice usually this is done by a central server who keeps records of all the balances.
In a decentralized network you don’t have this server so you need every single entity of the network to do this job, every peer in the network needs to have a full list with all the transactions to check if future transactions are valid or an attempt to double spend. In here comes cryptocurrencies which is a key part of the solution it removes the need of the central server and allows the transactions to be faster across the globe & are easy to keep track.
A cryptocurrency is a digital or virtual currency that is meant to be a medium of exchange, cryptocurrency is quite similar to real world currency just that it does not have any physical embodiment it also uses cryptography to work the way it does.
Features of Cryptocurrencies
Now some features of cryptocurrency are that there’s a limit to how many units can exist with Bitcoin this limit exists at 21 million now after this no more Bitcoins will be produced so you can easily verify the transfer funds. The hashing algorithms that Bitcoin uses makes it very easy for users to determine whether a transaction is valid or not.
They operate independent of a bank or a central authority they work in a decentralized manner. Now new units can be added only after certain conditions are met for example for Bitcoin only after a block has been added to the blockchain will the miner be rewarded with bitcoins and this is the only way new bitcoins can be generated. There are more than 1600 cryptocurrencies available, few of the popular ones are Bitcoin, Litecoin, Ethereum and Z cash.
Therefore, cryptocurrencies can be the next future of digital currencies. Nonetheless, many observers see potential advantages in cryptocurrencies, like the possibility of preserving value against inflation and facilitating exchange while being easier to transport and divide than precious metals and existing outside the influence of central banks and governments.
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