Bitcoin or cryptocurrency as the digital media of exchange also called as crypto coin, which use cryptography and shared transaction ledgers to create a secure, anonymous, traceable and potentially stable monetary system.
HOW DOES CRYPTOCURRENCY WORK?
Cryptocurrencies use a distributed network to allow an encrypted decentralized digital currency for a p2p (peer-to-peer) transaction system without the need for third parties.
In order to keep this secure, cryptocurrencies utilize mathematical algorithms and a public ledger via a process known as Mining.
First, let’s review the basics and essentials of cryptocurrency, and then we will do an overview of the other properties that have made cryptocurrency what it is today.
BASIC OF BITCOIN OR CRYPTOCURRENCY
In order to understand how cryptocurrency works, you’ll need to understand a few basic concepts.
BITCOIN as 1st of CRYPTOCURRENCY
Was the first proposed in a 2008 by someone named Satoshi Nakamoto (No One Knows For Sure Who Made Bitcoin). However, no one has yet been able to track down and fully confirm whether or not Nakamoto is even a real person.
As Bitcoin’s fame rises, its mysterious creator has become something like an internet folk legend. Bitcoin was the category creator of cryptocurrency and got everyone excited with huge movements in the Bitcoin price.
That is what happens when it goes from $0.05 to $1,200 in four years.*These days, there are plenty types of cryptocurrency that sell for more than $1, according to ⓘ CoinMarketCap
the number of cryptocurrencies (crypto coins) available over the internet as of 19 August 2018 is over 1600 and it is growing. The largest blockchain network, followed by coin such Ethereum, Ripple, Bitcoin Cash, Litecoin, EOS, Bitcoin Private and many more……
All confirmed transactions from the start of a cryptocurrency creation are stored in a public ledger. The identities of the coin owners are encrypted, and the system uses other cryptographic techniques to ensure the legitimacy of record keeping.
The ledger ensures that corresponding “digital wallets” can calculate an accurate spendable balance. Also, new transactions can be checked to ensure that each transaction uses only coins currently owned by the spender.
Bitcoin or cryptocurrency calls this public ledger a “transaction block chain“.
is a software program where Crytocurrencies are stored. To be technically accurate, cryptocurrency are not stored anywhere; there is a private key (secret number) for every address that is saved in the wallet of the person who owns the balance.
Wallets facilitate sending and receiving Bitcoins and gives ownership of the coin balance to the user.
A transfer of funds between two digital wallets is called a transaction. That transaction gets submitted to a public ledger and awaits confirmation.
When a transaction is made, wallets use an encrypted electronic signature (an encrypted piece of data called a cryptographic signature) to provide a mathematical proof that the transaction is coming from the owner of the wallet.
The confirmation process takes a bit of time (ten minutes for bitcoin) while “miners” mine (ie. confirm transactions and add them to the public ledger).
Cryptocurrency works with a similar concept. In cryptocurrency, “coins” (which are nothing more than publicly agreed on records of ownership) are generated or produced by “miners”. In simple terms, mining is the process of confirming transactions and adding them to a public ledger. In order to add a transaction to the ledger, the “miner” must solve an increasingly-complex computational problem (sort of like a mathematical puzzle). These miners are people who run programs on specialized hardware made specifically to solve proof-of-work system/puzzles. The work behind mining coins gives them value, while scarcity of coins and demand thereof causes their value to fluctuate. The other method for validating coins is called proof-of-stake. Value is also created when transactions are added to public ledgers as creating a verified “transaction block” takes work as well. Mining is using via open source software, so anyone can confirm the transaction. The first “miner” to solve the puzzle adds a “block” of transactions to the ledger. The way in which transactions, blocks, and the public ⓘBlockchain ledger work together ensures that no one individual can easily add or change a block at will. Once a block is added to the ledger, all correlating transactions are permanent and a small transaction fee is added to the miner’s wallet (along with newly created coins). The mining process is what gives value to the coins and is known as a proof-of-work system. Perharp, you may interested mining coins easily ⓘHERE
Cryptocurrency uses a system of cryptography (AKA encryption) to control the creation of coins and to verify transactions.
Most CONVENTIONAL currencies in circulation are controlled by a centralized government, and thus their creation can be regulated by a third party.
Cryptocurrency’s creation and transactions are open source, controlled by code, and rely on “peer-to-peer” networks. There is no single entity that can affect the currency.
Traditional currency is defined by a physical object (USD representing gold for example), but cryptocurrency is all digital. Digital coins are stored in digital wallets and transferred digitally to other peoples’ digital wallets. No physical object ever exists.
This is the number of calculations that your hardware can perform every second as it tries to crack the mathematical problem we described in our mining section.
Hash rates are measured in megahashes, gigahashes, and terahashes per second (MH/sec, GH/sec, and TH/sec. The higher your hash rate (compared to the current average hash rate), the more likely you are to solve a transaction block.
The bitcoin wiki’s mining hardware comparison page is a good place to go for rough information on hash rates for different hardware.
All this computing power chews up electricity, and that costs money. It’s worth looking at your hardware’s energy consumption in watts, when making your choice.
You want to make sure that you don’t end up spending all of your money on electricity to mine coins that won’t be worth what you paid.
Use these two factors to work out how many hashes you’re getting for every watt of electricity that you use. To do this, divide the hash count by the number of watts.
For example, if you have a 500 GH/sec device, and it’s taking 400 watts of power, then you’re getting 1.25 GH/sec per watt. You can check your power bill or use an electricity price calculator online to find out how much that means in hard cash.
However, there’s a caveat here. In some cases, you’ll be using your computer to run the mining hardware. Your computer has its own electricity draw on top of the mining hardware, and you’ll need to factor that into your calculation.
Cryptocurrencies are typically open source. That means that developers can create APIs without paying a fee and anyone can use or join the network.
Most cryptocurrencies use a proof-of-work system. A proof-of-work scheme uses a hard-to-compute but easy-to-verify computational puzzle to limit exploitation of cryptocurrency mining. Essentially, it’s like a really hard to solve “catpcha” that requires lots of computing power.
Owners of cryptocurrency keep their digital coins in an encrypted digital wallet. A coin-holder’s identification is stored in an encrypted address that they have control over – it is not attached to a person’s identity.
The connection between you and your coins ispseudonymous rather than anonymous as ledgers are open to the public (and thus, the ledgers could be used to glean information about groups of individuals in the network).
For something to be an effective currency, it has to have value. The US dollar used to represent actual gold. The gold was scarce and required work to mine and refine, so the scarcity and work gave the gold value. This, in turn, gave the US dollar value.
There are a host of services offering information and monitoring of cryptocurrencies.
ⓘCoinMarketcap is an excellent way check on the market cap, price, available supply and volume of crypto currencies.
ⓘ COINGECKO is a great way to stay in touch with the community and follow trends.
ⓘCryptoCoinCharts is full of information ranging from a list of crytocoins, exchanges, information on arbitrage opportunities and more. Our very own site offers a list of crypto currencies and their change in value in the last 24hrs, week or month.
ⓘCOINWARZ : A hand website for miner. This site can help miners determine which coin is most profitable to mine given their hash rate, power consumption, and the going rate of the coins when sold for bitcoins. You can even view each coins current and past difficulty.
You can purchase crypto coin (Bitcoin, Ethereum, Dash, Zcash, EOS, Monero and many more) with USD and other non-digital currencies (which sometimes are called “fiat” currencies) via crypto Exchanger.
Top reliable crypto exchanger are (credit or debit card most popular payment method) :
It’s possible to do online through your bank; you just have to find the appropriate online wallet for your area.
Selling some or all of your bitcoins is very similar to buying them – you can use the same resources to sell as well as to buy.
ⓘPrivate agents It is also possible to use private agents to convert bitcoins to another currency. These are private individuals with sufficient liquidity to operate like an exchange. A website listing individuals by country, localbitcoins.com, is the main resource for this type of exchange.
Funds are sent to the individual’s Bitcoin wallet, and the individual then sends you the equivalent in the relevant currency.
ⓘNote that this practice is unregulated and a certain degree of trust is required in all situations. Agents listed on localbitcoins.com have feedback and other consumer aids, but there is nonetheless no guarantee that your transaction will be honored. For this reason, we advise you only to use such methods in an emergency, or if you have sufficient knowledge that the agent you are using is reliable.
WHAT CAN BUY WITH CRYPTOCURRENCY?
The number of places where you can spend bitcoins is growing every day. In 2014, several major online retailers even began accepting Bitcoin directly, paving the way for major acceptance progress in 2015.
The major ways you can buy with Bitcoin are:
1-Via certain online merchants to purchase goods and services direct;
2-Via merchants offering gift cards (if you want to buy something from a merchant which does not yet accept Bitcoin directly);
3-Via certain physical merchants which accept Bitcoin directly;Certain other situations for small communities.
|NEXT ARTICLE : INITIAL START MINING CRYPTO @ BITCOIN|