If you’re a newbie when it comes to Cryptocurrencies Bitcoin, this is the article fit for you. In this article, we’ll talk about the things you should know to get started in Bitcoin. Read on!
What are Cryptocurrencies?
A cryptocurrency is a digital or virtual medium of exchange that uses cryptography in order to verify each and every transaction. In the early part of this year, there have been over 1,300 cryptocurrencies, which include the most popular ones like Bitcoin, Ethereum, and Litecoin.
In the past, there were attempts to create a digital or virtual currency, but they mostly floundered. This is largely because there was no trusted third party or central authority (like the bank) to verify the transactions. As a consequence, they were susceptible to fraud.
Meanwhile, the present generation of cryptocurrencies has their origins to Bitcoin, which was established in 2009 along with Blockchain, which is the technology that underpins it. They work together in a decentralized network in which each node sports a copy of the transaction ledger.
As for the user, every transaction is secured by public key encryption, which is a well-established cryptography method that involves pairs of keys, one of which is public and one of which is private, in order to send secure information.
What about the Blockchain?
The Blockchain is a cryptographically-secured information chain. Each of the blocks from the chain is formed when a computer successfully solves a cryptographic puzzle. This task is called “mining.” Whenever the task is completed, it broadcasts the solution to the network, which bundles up transactions in order to make a block.
Each block in the chain sports a cryptographic hash, which is like the digital fingerprint of data, of the previous block. The previous block, in turn, has the cryptographic hash of the one before that and so on.
This process practically makes it impossible to modify a transaction once it has been added to the Blockchain. If one tries to do so, it would mean the either side of the block would no longer be correct.
This chain then forms a digital ledger. Each computer on the network holds a copy of this ledger and each of them can access it. The distributed and decentralized architecture is very beneficial for the system because fraudsters and hackers wouldn’t be able to target a central point.
This also means that no single user can control the network in the way that a central bank can influence a country’s economy. Every users can considered equally able to influence the network since they have equal access to the ledger.
Pros and Cons
Digital currencies have pros and cons like any kind of tech.
For one good benefit, Finance Brokerage Cryptocurrencies are considered secure. The moment a transaction is added to the Blockchain it becomes almost impossible to modify. It’s decentralized, meaning no one node in the network can control the whole system. It also has low transaction costs, making it more efficient and less expensive to perform financial activities.
On the flip side, cryptocurrencies are still very new that regulators are just starting to wrap their heads around the system. Digital currencies also experience wild price swings in many instances, effectively making them very volatile.