Cryptocurrency is a digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of this security feature. Many cryptocurrencies are decentralized systems based on blockchain technology, a distributed ledger enforced by a disparate network of computers. A defining feature of a cryptocurrency, and arguably its biggest allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation.
Cryptocurrencies are created through a process called “mining.” Miners are rewarded with cryptocurrency for verifying and committing transactions to the blockchain public ledger. Ethereum, perhaps the second most valued cryptocurrency, has an annual mining reward of 5 ETH.
How does cryptocurrency work?
Cryptocurrency works using a technology called blockchain. Blockchain is a decentralized technology spread across many computers that manage and record transactions. Each transaction is a file that consists of the sender’s and recipient’s public keys (wallet addresses) and the amount of cryptocurrency transferred. The transaction is then signed off by the sender with their private key. All transactions are then recorded publicly on a blockchain, a decentralized ledger of all cryptocurrency transactions. Miners verify each transaction by solving complex mathematical problems and add it to the blockchain for approval.
By design, cryptocurrency blockchains are inherently resistant to modification of the data. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion from the network majority. Bitcoin was the first cryptocurrency supported by blockchain technology.
Cryptocurrency miners are rewarded with cryptocurrency for verifying and committing transactions to the blockchain public ledger. Ethereum, perhaps the second most valued cryptocurrency, has an annual mining reward of 5 ETH.
History Of Cryptocurrency
In 2009, Satoshi Nakamoto launched Bitcoin, the world’s first cryptocurrency. The code was published openly online, and anyone was able to take part in the mining process. Bitcoin quickly gained popularity, and by 2010 other developers began creating their own versions of the cryptocurrency.
Ethereum, Ripple, Litecoin, and Monero are just a few examples of altcoins that have been created in recent years. While Bitcoin remains the most well-known cryptocurrency, altcoins are also gaining in popularity as more people become interested in cryptocurrency and blockchain technology.
How will cryptocurrency be used in the future?
Cryptocurrency is still a relatively new technology, and it is not yet clear how it will be used in the future. Some believe that cryptocurrency will eventually replace traditional fiat currency, while others believe that cryptocurrency will simply complement existing currencies.
It is also possible that cryptocurrency will be used primarily for investment purposes, as a digital asset to be held and traded in the same way that stocks, bonds, and other assets are currently traded. Only time will tell how cryptocurrency will be used in the future.