Cryptocurrency: History, How It Works, and How It Is Used

Table of Contents

History

Cryptocurrency has been attempted since 1998. Bitcoin got its start from a person going by the name of Satoshi Nakamoto, whose real identity or identities (many believe that this is a group of people rather than a single person) remains unknown to this day. Bitcoin became publicly available in 2009. Initially, Bitcoins could only be gained from mining them. The mining of Bitcoin (and other cryptocurrencies) is the process of making new Bitcoins by solving complex computation equations. This solving of the equations also makes the cryptocurrency payment network trustworthy and secure by verifying the transnational information.

All cryptocurrencies are finite, meaning there is a maximum number of them. This is to prevent inflation from entering the networks. For Bitcoins that limit is 21,000,000 coins. At the current rate of mining, this number will be reached in the year 2140.

How It Works

Define Cryptocurrency

A virtual currency wherein exchanges are checked and records are kept up with by a decentralized framework using cryptography to secure, as opposed to a centralized authority. The use of cryptography makes it almost impossible to counterfeit. The decentralized framework is based on blockchain technology.

Define Cryptography

A secure means of communication that allows only the senders and intended recipients to read and understand the message.

Define Blockchain

The blockchain is a type of database, a collection of information stored electronically. This database is made up of blocks, a collection of sets of information, and a certain storage capacity. When a block is filled it is then chained to the previous filled block. This forms a chain of blocks, thus the blockchain. The blockchain acts as a timeline of transactions or a ledger. The blocks are timestamped when added to the chain.

The transaction process works like this.

A transaction begins;
The transaction is sent to a network of computers all around the world;
The network of computers solve intricate equations that validate the transaction;
This transaction is then clustered with other validated transactions to form a block;
The block is then added to the blockchain, joining the blockchain’s timeline;
The transaction is complete.

How It Is Used

The blockchain is most commonly used to store cryptocurrency. The blockchain has many other uses as well. Here are some of the current uses of the technology. This list is growing all the time also.

Sharing medical data
Cross-border payments
Personal identity security
Anti-money laundering tracking system
Supply chain and logistics monitoring
Voting mechanism
Intellectual property
Real estate processing
Retail loyalty programs
Data sharing and collaboration
Copyright and royalty protection
Security recording of legal documents
Refugee Aid
Statistic Transparency
Financing and Banking
Data privacy
Cross-Industry data consolidation
User Authentication
Human Resources
Replacing Passwords
E-Commerce
Smart Contracts
Paying Employees
Asset Management
Insurance Claims Processing
Smart Appliances
Passports
Birth, Wedding, and Death Certificates

Conclusion and Summary

The use of cryptography and blockchain in our day-to-day lives is new to us. This technology is here to stay though. I’ve worked in technology for over 25 years now and once a technology has a foothold and become accepted by those in the industry, the concepts stay. I for one am looking forward to the uses and what’s to come.

If you would like to learn about the different types of cryptocurrencies, I recommend trying Coinbase. Coinbase is free to create an account. Once you have an account, you get opportunities to learn about various types of cryptocurrencies and get paid to do so. You can learn about Etherium, for example, and get paid between $3 to $7 or more in Etherium for taking quizzes about what you’ve learned. I use it myself and have yet to put a penny in. I’ve learned about 8 cryptocurrencies and hold some shares (or portion of share) of each I’ve learned about.

You can also buy, sell, and stake (earn interest off of) cryptocurrencies with the app. You can also earn Bitcoin for inviting friends to sign up as well. Check out the link here.