The advent of cryptocurrency is already taking over our daily transactions. Cryptocurrency is a digital asset that exists in the crypto world and is referred to by many as “digital gold”. But what is cryptocurrency? You are probably interested.
It is a digital asset designed to be used as a medium of exchange. It is obviously a close substitute for money. However, it uses strong cryptography to secure financial transactions, verify asset transfers, and control the creation of additional units. All cryptocurrencies are virtual currency, digital currency or alternative currency. It should be noted that all cryptocurrencies use a decentralized system of control in contrast to the centralized systems of banks and other financial institutions. These decentralized systems work through distributed ledger technology that serves a public financial database. Blockchain is commonly used.
What is blockchain?
This is an ever-growing list of records that are linked and secured using cryptography. This list is called blocks. A blockchain is an open distributed ledger that can be used to record transactions between two parties in a verifiable and permanent way. In order for a block to be used as a distributed ledger, it is governed by a peer-to-peer network that collectively adheres to a protocol for validating new blocks. Once data is written to any ledger, it cannot be changed without changing all the other blocks. Thus, blockchains are secure by design and also serve as an example of a distributed computing system.
History of cryptography
David Chaum, an American cryptographer, discovered an anonymous cryptographic electronic money called ecash. It happened in 1983. In 1995, David implemented this through Digicash. Digicash was an early form of cryptographic electronic payment that required custom software to withdraw notes from a bank. It also allowed you to assign specific encryption keys before sending to the recipient. This property made it possible for the government, issuing bank or any third party not to track the digital currency.
After increasing efforts in the following years, Bitcoin was created in 2009. It was the first decentralized cryptocurrency created by Satoshi Nakamoto, a pseudonymous developer. Bitcoin used SHA-256 as its cryptographic hash function (proof-of-work scheme). Since the release of Bitcoin, the following cryptocurrencies have also been released.
1. Namecoin (April 2011)
2. Litecoin (October 2011)
3. Peercoin
These three coins and many others are called as altcoins. The term is used to refer to alternatives to Bitcoin or simply other cryptocurrencies.
It should also be noted that cryptocurrencies are exchanged over the Internet. This means that they are used mainly outside the banking systems and other government institutions. Cryptocurrency exchanges involve exchanging cryptocurrency for other assets or for other digital currencies. Common fiat money is an example of an asset that can be traded with cryptocurrency.
Atomic swaps
They refer to a proposed mechanism by which one cryptocurrency will be able to exchange directly with another cryptocurrency. This means that with atomic swaps, there will be no need for a third party to be involved in the exchange.