What is cryptocurrency?
Cryptocurrency is an electronic payment system that uses cryptography to secure transactions. Cryptography is the process of encoding and decoding information in a way that makes it unreadable by anyone other than those who possess the correct decryption key. It was invented in 1976 by Whitfield Diffie and Martin Hellman, and has been used in many applications since then. In 2009, the first digital currency (bitcoin) was launched. Bitcoin is a decentralized peer-to-peer network where no central authority or bank manages the system. Transactions occur between users directly, without an intermediary.
Bitcoin is the most popular form of cryptocurrency today. The value of bitcoin has increased significantly over the past few years. In 2013, it reached $1,000 per coin. Currently, it is valued at over $12,000 per coin.
Why is it important?
Cryptocurrency has several advantages over traditional forms of money, including faster transaction times, lower transaction fees, and no third party involvement. Bitcoin is a decentralized, peer-to-peer network. This means there is no central bank that controls the supply of bitcoins, and no single company that acts as a middleman for transactions. Because of this, transactions are processed almost instantly. Also, there are no banks, so transaction fees are very low. Finally, because transactions occur directly between users, there is no need for a third party to verify identity. This makes it possible to conduct transactions anonymously.
How does it work?
To use bitcoin, you must first download a wallet program onto your computer. Once the wallet is installed, you can create a new bitcoin address and send bitcoin from one user to another. This is done by using the private key of the recipient. The private key is a string of letters and numbers that is unique to each person. When you send someone bitcoin, you have to type in their address into the bitcoin wallet, and then click send. Your wallet will generate a random number, which is known as a “hash.” This hash is then sent to the recipient’s wallet. When they receive the transaction, they will look up the address of the sender and check if the hash matches the one generated by the sender’s wallet. If the two hashes match, the transaction is verified.
If the transaction is verified, the recipient will see a message saying that he or she now owns a certain amount of bitcoin. The recipient can then transfer the bitcoin to any bitcoin exchange or to his or her own wallet.
The beauty of cryptocurrency is that there is no central authority. There is no bank or government controlling the supply of bitcoins. Because of this, the value of bitcoins fluctuates. However, this also makes it risky for investors. Because the value of bitcoins changes constantly, people may buy them at a high price only to sell them at a low price later. As a result, there is a lot of volatility in the value of bitcoins.
