The rise of cryptocurrency is already taking over our daily transactions. Cryptocurrency is a digital asset that exists in the crypto world and many refer to it as “digital gold”. But what is cryptocurrency really? You must be thinking.
It is a digital asset intended to be used as a medium of exchange. Obviously, it is a close substitute for money. However, it uses a strong cryptography to secure financial transactions, verify asset transfers, and control the creation of additional units. All cryptocurrencies are either virtual currencies, digital currencies or alternative currencies. It must be noted that all cryptocurrencies use a decentralized control system as opposed to the centralized system of banks and other financial institutions. These decentralized systems operate through a distributed ledger technology that serves a public financial database. Typically, a blockchain is used.
What is a blockchain?
It is an ever-growing list of records that are linked and secured using cryptography. This list is called a block. A block chain is an open, distributed ledger that can be used to record transactions between two parties verifiably and permanently. To enable a block to be used as a distributed ledger, it is managed by a peer-to-peer network that collectively adheres to a protocol for validating new blocks. Once data is recorded in a book, it cannot be changed without changing all other blocks. Therefore, blockchains serve as examples of distributed computing systems that are secure by design.
History of Cryptography
David Chaum, an American cryptographer invented an anonymous cryptographic electronic money called eCash. It happened in 1983. In 1995, David implemented it through DigiCash. DigiCash was an early form of cryptographic electronic payment that required user software to withdraw notes from banks. It allows designation of specific encrypted keys before sending to recipient. This property is not traceable to the digital currency government, issuing bank or any third party.
After increased efforts in the following years, Bitcoin was created in 2009 It was the first decentralized cryptocurrency and was created by Satoshi Nakamoto, a pseudonymous developer. Bitcoin uses SHA-256 as its cryptographic hash function (proof-of-work scheme). Since the release of Bitcoin, the following cryptocurrencies were also released.
1. Namecoin (April 2011)
2. Litecoin (October 2011)
These are mentioned as three coins and many others altcoins. The term is used to refer to alternative forms of Bitcoin or simply other cryptocurrencies.
It is also important to remember that cryptocurrencies are exchanged over the Internet. This means that their use is primarily outside the banking system and other government institutions. Cryptocurrency exchange involves the exchange of cryptocurrencies with other assets or with other digital currencies. Conventional fiat money is an example of an asset that can be traded with cryptocurrency.
These refer to a proposed process where one cryptocurrency would be able to be directly exchanged for another cryptocurrency. This means that with nuclear swaps, there will be no need for a third party to participate in the exchange.