Cryptocurrency History
There have been many attempts to create digital currencies during the '90s boom' technology, with systems such as Flooz, Beenz and DigiCash appearing on the market but certainly failed. There are many different reasons for their failures, such as fraud, financial problems, and even "friction" between company employees and their bosses.
In particular, all of these systems use 'Trusted Third Parties', which means that the company behind them verifies and facilitates transactions. Because of the failure of these companies, the creation of a digital money system took a long time.
Then, in early 2009, an anonymous programmer or group of programmers under the alias Satoshi Nakamoto introduced Bitcoin. Satoshi represented it as a 'peer-to-peer electronic cash system'. Bitcoin is decentralized, meaning that no server is involved and there is no central control authority. The concept is very similar to peer-to-peer networks for sharing files.
One of the most important problems that the payment network must solve is double spending. This is a fraud technique that can spend the same amount of cryptocurrency twice or more. Usually in FIAT currencies, the solution to preventing this fraud is the existence of a trusted third party (central server) that keeps records of balances and transactions. However, this method always involves authorities who basically control your funds and with all your personal details.
In a decentralized network such as Bitcoin, each participant must carry out this verification work. This is done through Blockchain - the general ledger of all transactions that have occurred on the network, available to everyone. Therefore, everyone on the network can see each account balance.
Each transaction is a file consisting of a public key (public key) of the sender and recipient which is the wallet address (address) and the number of coins transferred. This transaction also needs to be signed by the sender with their private key. All of this is only basic cryptography. Finally, the transaction is broadcast on the network, but must be confirmed first.
In cryptocurrency networks, only miners can confirm transactions by solving cryptographic puzzles. They take transactions, mark them as legitimate and spread them throughout the network. After that, each node from the network adds it to its database. After the transaction is confirmed it cannot be recovered and cannot be changed. Miners receive prizes, plus transaction fees.
Basically, each cryptocurrency network is based on the absolute consensus of all participants regarding the legitimacy of balances and transactions. If the network node does not agree on one balance, the system will basically be damaged. However, there are many rules made beforehand and programmed into the network that prevent this from happening.
Cryptocurrency is so called because the consensus process is ensured by strong cryptography. With this, making our view of the role of the existing third party becomes superfluous.
Images Credit: Freepik
1 comment:
cryptocurrencu is boommmb