Mostly due to its revolutionary properties crypto currencies has become a success! Their inventor, Satoshi Nakamoto dreamed of it. From all the others trying to create a digital cash system didn’t attract the masses like Satoshi and his invention of the birth of crypto currencies which is known as Bitcoin. So when the announcement of the first Bitcoin in 2009 it was a revolution of a new electronic cash system that uses a peer-to-peer network to prevent double spending.
So, what are cryptocurrencies really? Well if you take away all the noise around it and reduce it to a simple definition, you find it to be just limited entries in a database no one can change without fulfilling specific conditions. This may seem ordinary, but believe it or not this is exactly how you can define currency. Money is just about a verified entry in some kind of database of accounts, balances, and transactions.
So, how miners create coins and confirms transactions? To dive into this let’s look at the mechanism ruling the databases of crypto currencies. A crypto currency, like Bitcoin, consists of a network of peers. Every peer has a unique record of the complete history of all transactions and thus of the balance of every account. So let’s look into a transaction in action.
A transaction is a file that says, “Jane gives X Bitcoin to Alice” and is assigned by Jane’s private key. After it is assigned, a transaction is broadcast in the network, sent from one peer to every other peer. This is simple peer-to-peer technology. The transaction is known almost immediately by the whole network. But only after a specific amount of time it gets confirmed. You can say that crypto currencies are all about confirmation. As long as a transaction is unconfirmed, it is pending and can be forged. When a transaction is confirmed, it is set in stone as completely unique. It is no longer forgeable, it cannot be reversed - ever. It is part of an immutable record of historical transactions of the so called Blockchain.
Only miners can confirm transactions. This is their job in the crypto currency-network. They take transactions, stamp them as legit and spread them in the network. After a transaction is confirmed by a miner, every node has to add it to its database. It has become part of the Blockchain. For those doing the mining the miner gets rewarded with a "token" of the crypto currency, for example with Bitcoins.
Since miner activities is the single most important part of the crypto currency system lets dive more into it a little. Logically everybody can be a miner. Since a decentralized network has no authority to delegate this task, a crypto currency needs some kind of mechanism to prevent one ruling party to abuse it (that’s how todays FIAT money system is ruled) - hence the corruption we have. So, Satoshi Nakamoto set a rule that the miners need to invest some work of their computers to qualify the task of mining. But from the cost of owning miners for oneself it tends to be expensive. But now there are cloud base services to purchase your own power to mine yourself. Crypto currency can only be created if miners solve a cryptographic puzzle and get a piece of that currency and that miner keeps it. This in turn provide an intrinsic worth akin to digging gold metal form the ground. After all, currency MUST have an intrinsic value (unlike FIAT currency that now holds zero intrinsic value as it is simply being printed to maintain Governments and Banks).
Crypto currencies are digital gold. Sound money that is secure from political influence. It is Money that promises to preserve and increase its value over time. The revolution is already happening. Institutional investors start to buy crypto currencies. Banks and governments realize that this invention has potential to draw their control away. Crypto currencies are changing the world. Step by step. You can either stand beside and observe, or you can become part of history in the making. It is your choice. In 2018 it is expected to go main stream with Amazon and others taking the currency to the masses. What do you think will happen to crypto currency then?
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