Cryptocurrency: From Blockchain to Bitcoin

The key to understanding cryptocurrency is to start with basics

The Cryptocurrency Basics

Cryptocurrency, better know as crypto, is a digital currency. It was designed to act as an asset exchangeable through a computer network. Crypto is not reliant on any central authority, such as a government or bank, to uphold or maintain it. Cryptocurrency is aiming to be the digital currency of the future. One that is owned by the people and cannot be manipulated by a single source.

The word cryptocurrency comes from the combination of cryptography (the study of secure communication) and currency. Cryptocurrencies are not currently seen as a currency per se. Instead they are more like an asset of their own. However, many countries are starting to explore their implementation as such. Cryptocurrency also does not exist in physical form. There are no actual “bit” coins – and are not typically issued by a central authority.

A decentralized cryptocurrency relies on the blockchain technology to record every transaction. A blockchain is a secure, shared and decentralized digital ledger. It serves as a public record of every transaction. Blockchain relies on the idea that if data is stored across the network versus one central server, it is safer. By decentralizing the data, in theory it cannot be manipulated. 

Cryptocurrency
Cryptocurrency

Cryptocurrency Origins

The modern day Cryptocurrency story began in 2009 when a blockchain technology was released as open-source. The origins of this code are shrouded in mystery. A pseudonym was given to the creator, Satoshi Nakamoto, and their identity is still a mystery.

The first cryptocurrency was launched shortly thereafter: Bitcoin. When the currency was originally launched, only “miners”, who were able to validate the blockchain, even had access to it. Essentially they would trade bitcoin back and forth in an attempt to validate the technology. At this point, Bitcoin had no real value. But that changed soon…

On May 22, 2010, the first “financial” transaction involving bitcoin took place. 10,000 BTC was exchanged for two pizzas from Papa John’s. That same amount of bitcoin is worth nearly $400 million today.

Blockchain
Blockchain

The blockchain begins with a genesis block, formed when transactions (i.e., “blocks”) are created and added to the database. These transactions are usually groups of data that indicate cryptocurrency was transferred from one person to another. Each transaction is public. This allows anyone with access to the blockchain to verify that a certain amount of Bitcoin was transferred from one person or entity to another at a particular time. Tens of thousands of computers work together to maintain the blockchain. They are constantly verifying that each entry is valid and updating the chain whenever a new one occurs. 

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