What is Cryptocurrency

Cryptocurrency is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it. It is decentralized digital money that is based on blockchain technology and secured by cryptography. To understand cryptocurrency, one needs to first understand three terminologies – blockchain, decentralization, and cryptography.

There are more than 9,000 different cryptocurrencies in circulation. The most popular versions are Bitcoin and Ethereum.

Block Chain

From Wikipedia: A blockchain is a distributed ledger with growing lists of records (blocks) that are securely linked together via cryptographic hashes. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. Since each block contains information about the previous block, they effectively form a chain, with each additional block linking to the ones before it. Consequently, blockchain transactions are irreversible in that, once they are recorded, the data in any given block cannot be altered retroactively without altering all subsequent blocks.

While they are commonly thought of and used in things like cryptocurrencies and NTFs, they have other uses. Any time you need to track data and ensure that it cannot be manipulated, block chain is a possible contender.

Think about the police, and how they need to track the chain of evidence to make sure it is not tampered with, and no one who shouldn’t have access doesn’t access it. You might also think of shipping records, especially if they have to go through customs to ensure that the information is both correct, and track who has handled it. (You see this when you do track a package on UPS or other carriers website.)

Cryptography

Cryptography is the process of hiding or coding information so that only the person a message was intended for can read it.

Cryptography is important for protecting data and users, ensuring confidentiality, integrity, non-repudiation, and authentication. Cryptography can also prevent cyber criminals from intercepting sensitive information or tampering with it.

Anytime you order something online and enter sensitive information, such as your credit card, your data should be encrypted to prevent interception and access by criminals.

There are several types of cryptography, which is beyond the topic of this particular discussion.

Decentralization

Decentralization is the process by which the activities of an organization, particularly those regarding planning and decision-making, are distributed or delegated away from a central, authoritative location or group and given to smaller factions within it. It is a response to the problems of centralized systems.

There are those who believe that governments and centralized banks may operate in their own best interest, which may not be the same as their own. Therefore, if you can work with a currency which isn’t reliant upon another group, you are not controlled by that group. We’ve seen this before where governments have printed a lot of money to pay down what they owe, but at the cost of high inflation.

A good, or should we say bad, example of this is the inflation caused by Germany printing money during the 1920s. This caused inflation to be so bad, that it was at 98% PER DAY, at it’s peak. That means, everything cost twice as much as it did the day before. Unfortunately, your wages will probably not keep up with that. This happens in general when a government prints money to either keep the economy functioning or pay off debt.

Even if inflation is relatively low, if you are not getting a pay increase to keep up with it, then you are falling behind.

What is Cryptocurrency was originally found on Access 2 Learn