These days, everyone is trying to understand cryptocurrency. Cryptocurrency is digital money that is designed to be secure and anonymous. Most of us would be able to recognize Bitcoin as one type of cryptocurrency. Last year, the value of Bitcoin and many other cryptocurrencies appreciated significantly, though some governments and skeptics have described some cryptocurrency offerings as a Ponzi scheme. Bitcoin was established in 2009 as the first cryptocurrency.
Currently, more than 1,000 cryptocurrencies are on the market. All are based on blockchain technology. Blockchain uses distributed computers to store a record of transactions and verify new transactions, without the participation of any organization for validation.
Cryptocurrency has become a hot topic. In 2017, many investors backed cryptocurrency rather than investing in penny stocks, mutual funds or other financial instruments. We have seen many new cryptocurrencies launched in the market. Bitcoin touched U.S. $20,000 in December. Ethereum, Ripple, Dash and Litecoin are other top cryptocurrencies that moved up fast in 2017, although all have declined in value in January to date.
The technology behind cryptocurrency
Let us further examine the technology of blockchain. Is it reliable? Is it difficult to hack? Blockchain is created on distributed ledger technology, which securely records transactions across a peer-to-peer network. The blockchain technology was created by Satoshi Nakamoto for trading Bitcoin. We can now see its potential reach far beyond cryptocurrency.
A distributed ledger is a record of transactions that is shared and synchronized across many computers without centralized control. Each party owns an identical copy of the record, which is automatically updated as soon as any additions are made. In blockchain, every participant can see the data and verify or reject it using consensus algorithms. Approved data is entered in the ledger as a collection of “blocks” and stored in a sequential “chain” that cannot be altered. Bitcoin and Ethereum are based on public blockchain. Anyone can read public blockchains, send transactions to them and participate in the consensus process. Read More