Understanding The Technology Behind Cryptocurrencies

Anne BecksFintech Comments

The origin of the crypocurrency is cloudy. The only name associated with Blockchain technology is Satoshi Nakamoto. This individual or group of individuals is attributed to the release and development of Bitcoin in 2009. In the early days, it was just a new means of digitally making payments anonymously without the use of a third party. This is 2017, and many still fails to understand the technology behind cryptocurrencies. Let’s just see this as a beginner’s guide to understanding all the new buzz words in the world of finance; Cryptocurrency, Bitcoin, Litecoin, ICO, Blockchain, Hard Fork and many others. Just like many others, you are wondering what all this denotes and why are they suddenly the lexicon on everyone’s lips.

To make this simpler, it’ll be in form of questions and answers

What are Cryptocurrencies?

Just think of money in the digital space. It is far different from PayPal, Payoneer, or Skrill. What makes cryptocurrencies distinct is the use of cryptography in creation through Blockchain technologies. So also, its non-reliant on any government authorities for its issuance or control.

Bitcoin is the most successful of cryptocurrencies without any argument. More than 3000 other forms of cryptocurrencies has been developed. All have recorded different levels of acceptability, popularity and success. Examples of cryptos include Ethereum, DashCoin, Bitcoin Cash and many more.

What Does Blockchain Technology Mean?

That should be the next question on your mind if you now understand cryptocurrencies. Let’s borrow the words of Don & Alex Tapscott who sees Blockchain as a digital ledger of cryptocurrency transactions that is never corruptible. Blockchain technology powers cryptocurrencies yet it cannot be controlled by any single entity. Till date, Blockchain is without a single history of failure.

Every little disruptions that have occurred to the Blockchain technology has been to human errors and bad intentions. None can be attributed to its underlying concepts and functionality. Every data on the Blockchain network is made public, an embedded level of transparency. Simply put, Blockchain technology cannot be corrupted as it requires an infinite amount of computing power to carry out.

How Can I Make (Mine) Cryptocurrencies

The correct lexicon is “mining” as that is the only medium of making cryptocurrencies. Cryptocurrencies is unlike your currency that is mined by the government or rain that falls off the sky. It takes a lot of work to mine cryptocurrency. Using Bitcoin as example, there can only be 21 Million Bitcoins in existence. Satoshi Nakamoto or whoever is behind the technology already ensured that.

Since we are using Bitcoin as example, let’s discuss the process of mining. Mining of bitcoin require loads of electrical energy which miners use in solving complex mathematical problems. Application Specific Integrated Circuits is used in mining of Bitcoins. The reward for mining is not as lucrative as it was for early adopters.

What Does The Future of Cryptocurrencies Look Like

Hard to predict but it’s going to be in the positive perspective. The technology has gained wide adoption and even traditional financial institutions are buying into the technology. What comes to mind is how long it will take to bastardize the incorruptible nature of Blockchain Technology.