A cryptocurrency is a digital source that is designed to function as an exchange medium using cryptography to protect transactions in a general public register. A community guarantees the authenticity of the transactions in addition to creating additional monetary units (Victor, 2017).
What problems does Bitcoin try to solve?
Bitcoin is currently the most popular cryptocurrency. The problem that Bitcoin is trying to solve is a serious problem that many people around the world face. Leo Tolstoy said: "Money is a new form of slavery". By controlling the money, there is an enormous power in the world today. The huge amount of money in circulation is mainly controlled by bankers, who exercise the power of inflation and currency evaluation as a means to raise and control product prices in the economy (Donk, 2017).
Centralized and institutional control of money is the problem that Bitcoin is trying to solve. Like many other cryptographic currencies, Bitcoin authorizes users of cryptocurrency because they do not need the authorities of a centralized system to do business and make purchases. As a peer-to-peer (P2P) and decentralized user can exchange without the rules of the transaction being determined by third parties. Cryptocurrency allows users to act anonymously, removing the power traditionally used by financial institutions.
What is the blockchain? A look at the basics.
The blockchain may seem complex at first, but in reality it is very simple. The blockchain is just another type of transaction log database. Once completed, a transaction is copied to all computers in a participating network, which is sometimes referred to as "distributed accounting".
The data is stored in "blocks". Two main characteristics of the "blocks" are:
- Content: mainly a list of instructions and digital sources (such as transactions), as well as the amounts and addresses of the parties to such transactions.
- Header: metadata, such as the unique block reference number, the time at which the block was created and a link to the previous block (Deloitte corporation, 2016).
With the last block you have access to all previous blocks that are connected by a chain (blockchain). As network participants grow, it becomes increasingly difficult for malicious actors to pass community-led verification processes (Deloitte Corporation, 2016).
What are "minors"?
Mining is a way to make bitcoins. One of the main reasons is the ability to remain anonymous. If you solve a block (you need a lot of computing power, but once you've paid for bitcoins) and use Tor (anonymous browser), you can keep bitcoins completely anonymous (Sterry, 2012).
Bitcoin can be simplified in three things: first, the set of rules (protocol) that determines how the network should be operated; the second is the software that updates the protocol; the third point is the large network of computers running the software that activates the protocol. It is essentially a computer chain that forms the fundamental basis of the system. This activity of the third point is called mining. The extraction process includes the verification of transactions, the collection of transaction costs, the prevention of double costs and the creation of currency bids. Mining also provides IT security for the system because a large amount of processing power is built up in previous transactions. Minors check transactions by evaluating them against previous transactions. Transactions cannot issue bitcoins that were previously issued or that do not exist. They must respect the rules laid down in the protocol (Sterry, 2012).
Mining and blockchain are the keys to activate a cryptocurrency, and these two elements have only just begun.
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