Bitcoin the biggest boy of all cryptocurrencies has risen by more than 750% in the past year. Presently, it is worth four times the value of an ounce of Gold. Despite the fear of a bubble with the ever-rising value of Bitcoin, it has been gaining wider acceptance with other cryptocurrencies. Cryptos are not only being accepted by individuals, even governments are given attention to Cryptos as a payment method. With this in mind, that shows how important Cryptos will be from now into the future. You need to understand all the basics of these digital currencies as it all matters now.
1. Adaptive Scaling
Measures put in place to ensure that cryptocurrencies can be adopted on a small and large scale. For instance, the Blockchain technology allows for the mining of one Bitcoin every ten minutes.
Pseudonymity is what makes Crypto safe. Cryptocurrencies can only be kept in an encrypted digital wallet. The wallet is not attached to the holders’ identity. How you access your coins is also anonymous.
The creation, transaction, and verification of transactions are through encryption. Cryptocurrency is built upon cryptography which is responsible for it’s anonymity.
Your country’s legal tender is controlled by the government. However, Cryptos cannot be controlled by a single entity. The creation and transaction of Cryptos are via an open source code.
Just think of this as businesses that take your fiat currencies in exchange for cryptocurrencies and vice versa. There are many active and inactive exchanges with Bitfinex topping as the largest in the number of transactions.
Legal tender issued and backed by the government of a country. Government declare any material it deems fit (paper) as a legal tender to serve as a medium of exchange. The lack of intrinsic value is a common characteristic of fiat money. The US Dollar is a fiat money.
7. Hard Fork
Let’s use a common analogy. Remember when you updated from windows 8.1 to 10 and how you struggled to understand how it works. That is what happens during a hard fork also, a consensus update between miners that create incompatibilities between the older and latest version.
A means of funding Blockchain projects. Initial Coins offer is a means through which companies and even startups raise capital by offering a new crypto.
Cryptos are mined by solving complex mathematical problems. Simply put, mining is the confirmation of transactions by the fastest miner which is then added to the public ledger.
10. Open Source
Anyone can use, create and tweak APIs free. The technology powering Cryptocurrencies is open sourced.
11. Public Ledgers
Every transaction from the creation of a Cryptocurrency is stored in an open ledger. New transactions can be ascertained to ensure that the coins being spent belong to the spender.
12. Smart Contracts
Nick Szabo that conceived the original idea likened it to a digital vending machine. Smart contracts are made possible by Blockchain technologies. Simply put, Smart Contract are programs that carry out specific instructions given by it creator.
The movement of Cryptos between two wallets is known as a transaction. Every wallet that house coins are backed by a cryptographic signature. Confirmation is needed for every transaction and takes time (averagely ten minutes).
A program that stores private and public keys with an interaction with Blockchain for sending and receiving of cryptocurrencies. There is no real exchange of coin, all you’ll see is a change in your wallet balance with records on the Blockchain.