In the 21st century, new opportunities appear every day, financial instruments that bring economic relations to a qualitatively new level. A vivid example of this is cryptocurrency and related concepts, which have already been appreciated by both major business people and ordinary Internet users.
The concept of cryptocurrency and its essence
About cryptocurrency today does not say is that lazy, but what is it? In simple terms, this is a digital currency, its unit is a coin. They are protected from the possibility of forgery, representing encrypted information that is not accessible to copying, thanks to the use of the cryptography method. Finansy choose above Korea fopowyreweja.
Do not confuse the concept of “electronic money” and “cryptocurrency” , because:
- Electronic money can appear on the account in any of the modern systems only after they are deposited into the account in their real, physical incarnation, for example, through the cashier or payment terminals, therefore the electronic form is only one of the forms.
- Cryptocurrency is issued immediately on the Web, and it is in no way associated with conventional currencies or the state system.
Anyone can do cryptocurrency earnings with special support and equipment. It is the computing power that will be responsible for solving the constantly complicated algorithms, extracting a coin, or, more precisely, the encrypted information. What serves as evidence of the presence of coins in the web? Blockchain is a kind of account, which will be described below. The currency is kept decentralized on users’ cryptographs.
Advantages of cryptocurrency
- Since the algorithm code is open, it can be extracted by anyone who has expressed a desire.
- All transactions are anonymous, that is, any information about the owner of the crypto wallet is missing!
- Cryptocurrency has a decentralized nature – there is no single bank, there is no control over payments and transactions.
- Cryptocurrency is not subject to such a process as inflation, since only a limited number of coins can be issued.
- High level of protection – the currency can not be copied.
- Minimum commission.
Among the most famous cryptocurrencies in the modern market are the following:
- Lightcoin (LiteCoin)
- Ethereum (Ethereum)
- And many other altcoins.
Cryptocurrency structure by points
Any cryptocurrency has its own structure, which demonstrates the difference from all that was previously.
- A cryptocurrency does not have a single internal or external administrator, that is, the system is 100% self-organizing and independent.
- The central server is also missing. This is a decentralized system, and the database is not stored in one place, as each participant of the system has copies of it , which are regularly checked against each other.
- Any payment is encrypted using a secret key available only to the owner of the funds. Each participant has their own special address (wallet) and key (i.e. password).
- The new unit is added to the system consistently in the distributed database, along with information regarding all transactions. Finansy break closeto Denmark wobemo.
Mining and miners: process specifics and participants
All cryptosystems, working with information, use computer power, and they are simply huge, so a logical question is born – where to get them, which contributed to the emergence of such a term as mining (mining of cryptocurrencies).
What it is? Extraction of coins through resource-intensive calculations. This is a task that is available to many users who give away some of the power of their computer to solve those tasks related to the earnings of cryptocurrency. There are several ways to earn money on mining:
- Through the PC – special software is downloaded, which allows you to direct some of the power to the process of calculating cryptocurrencies. It does not need any investment, however, and so you can earn a little.
- Mine can be through special equipment (integrated circuit special purpose), creating a “farm”, actively working and bringing a stable income. In the people it is more known as asiki (ASIC) – an integrated circuit for special purposes, that is, such a scheme that focuses on solving one specific task, in our case it is the earnings of cryptocurrencies, for example, Bitcoins. In this case, gently take care of acquiring high-quality and powerful equipment, since further earnings on an industrial scale will directly depend on this. A farm is a set of computers that are capable of performing up-to-date calculations, working around the clock without lunch breaks. To efficiently mine a cryptocurrency, you need the appropriate powerful video cards and power supplies. The formation of a farm is always a significant cost that is directly related to the purchase of equipment, payment for electricity.
- Often miners decide to rent such power. This is cloud mining. This model is characterized by the use of cloud services, as the name implies. Miner groups are grouped into certain structures, and their priority goal is to make good profits, which is much higher than with individual mining. The scheme is as follows: the company acquires modern and powerful equipment, sets it up and rents it to miners, and takes upon itself all questions regarding the service, payment of utility bills and other aspects (see services for working with cloud mining ).
- If you do not want to invest large sums, and a stable and small profit in priority, you can consider the option of joining the pools. This is a node that integrates in itself a certain number of miners (they all have different processing power). All participants have one goal – to find the correct block. For the first correct block, the reward will be received by the pool that distributes profits between the participants, taking into account the contribution of each and them, pursuing the principle of equity.
Interestingly, the term “mining” itself is translated from English as “mining”, only a pickaxe or a shovel will not be useful here, since it is enough to have a powerful computing system in hand to help the process of recording a block of transactions in the blockchain. Finansy happen after CostaRica wodagyrilar.
World’s first cryptocurrency – Bitcoin
The very first cryptocurrency of the world, which is still the most famous to this day, is Bitcoin. The first mention of it appeared in 2008. Its founder was a man who chose to leave himself incognito and spoke to the public under a pseudonym. Today, the rate of this currency is quite high, which attracts the attention of a large number of people. However, the number of units that can be mined, experts say, is limited.
According to forecasts, the last possible Bitcoin will be produced in a few decades. And to mine it every year becomes more difficult, which is associated with the desire to keep its value. Let’s find out more about its production, storage and use.
One of the main ways of acquiring Bitcoin is its independent extraction. This process is carried out using a computer and a special program. But not every computer is suitable for this, but only one that has a powerful video card. Some miners prefer to purchase several interconnected video cards for faster mining of currency. However, the cost of such bundles is quite high, but the period for which these costs pay off is several years. Another disadvantage of self-production is that it requires a large amount of electricity.
Since for many, mining is an unattainable option, Bitcoin can be simply purchased on exchanges, in exchange offices, or from a particular owner.
As with any currency, you need a wallet to store Bitcoin. There are plenty of such wallets on the net. They are all different in functionality and appearance. It is better to choose the most famous, because they are more secure and safe. The data for logging into the wallet (login, password) should not be simple, it is preferable to make them tricky, so that fraudsters would not easily break the wallet. At the same time, it is necessary to write them down for yourself in order not to forget and not to lose, otherwise, in which case, you will not be able to recover the data and contents of the wallet.
You should not keep all currency in one wallet, for the purpose of their safety. The best and safest option is to create a wallet on your computer and store the funds there. But, unfortunately, such wallets have a large database and require constant updating. A prerequisite in this case is the presence of an anti-virus program on the computer. If possible, always make a backup copy of the wallet.
- In countries where the cryptocurrency is a legal unit, it can pay for any goods or services.
- In addition, it can be displayed on the card, i.e., exchanged for ordinary money or sold on the same exchanges or exchange offices at a higher rate and receive the difference in the form of profit.
Opening Bitcoin Satoshi Nakamoto. Bitcoin development in dates
As an independent currency and payment system, Bitcoin appeared in 2009, when the dataset in the virtual space began to be activated among serious businessmen and investors, and not just ordinary users of enthusiasts.
- In the summer of 2016, geeks on the Slashdo information portal noticed that there was a strange article on their file sharing service that had never been there before. She turned out to be the work of Satoshi Nakamoto, who was not yet known . It contained all the detailed information about what bitcoin is and what advantages it has over classical fiat money. At the end of the article was attached file with the source code. So its author showed that the Bitcoin system is absolutely transparent and the authors will not patent the invention. With the creation of Bitcoin and the beginning of its popularization, the world of cryptocurrency started in full swing, which appeared as a result of the open publication of pieces of code on the network.
- Less than a month later, at the end of the summer, a still poorly optimized network was tried to be hacked by stealing some of their collected coins from the wallets of some large cryptocurrency holders. Fortunately for them, the developers were able to restore the network, while eliminating malicious files from the computers of the cryptocurrency support team members. Read more about how hackers tried to crack Bitcoin wallets here .
- In the autumn of 2010, there is a surge in the activity of miners and investors in the network, due to which the capitalization of the coin reaches a level equal to one million dollars. Now it’s hard to believe that just seven years ago, the most expensive currency unit had a total of a little more than one million dollars of capital within itself. In this case, one coin cost about half a dollar per unit.
- In March 2011, the very first stock exchange trading in virtual currency appeared in the network. Officially, with the support of the creator of Bitcoin, this currency could be bought and sold only on MtGox and nowhere else. Unfortunately, for a number of reasons, the MtGox resource ceased to function in 2014. After it, several more large and reliable cryptocurrency exchanges, such as EXMO and LIVE COIN, appeared.
- In October 2011, the news appeared on the network that the very first fork was created based on the source code. He had the name “Lightcoin” and claimed the title of the second largest capitalization of the coin in the market, but in 2015 it was replaced by Ethereum.
What is Blockchain?
It is impossible to talk about cryptocurrency and not to touch on such a topic as blockchain (from the English word “blockchain” – “a chain of blocks”). In essence, any block is a collection of data, zeros, and ones. All of them are lined up in a chain, as any of the blocks “knows” about which blocks go to him or behind him. All the data inside them is intended to describe everything that happens on the web. When a transaction is performed, all information is recorded in the nearest blocks, a file containing the information is formed, and the data is available to all users of the system.
Speaking in simple language, it is impossible to do something “secretly” in such a network, since every move is recorded, any participant has access to information regarding past transactions. However, anonymity is preserved, so users can only be identified by the cryptocell number. You can compare the functioning of the blockchain with the work of torrent trackers:
- The system also consists of multiple peers.
- They transfer funds among themselves.
- All operations are performed inside a special system.
Blockchain technology can be expressed to understand the essence of the following sequence of operations:
- User X wants to transfer money to user U.
- The transaction is transmitted to the network, after which a new unit is assembled.
- Immediately, the blocks are sent to each of the participants in the system to pass the test.
- All register blocks in their version of the database.
- At the next stage, the block falls into its place in the chain.
Many believe that blockchain and Bitcoin are one and the same. This is not true! Blockchain is a technology, and not only Bitcoin works on it, but also many other cryptocurrencies. Most importantly, it is actively used in various fields for solving important tasks:
- Resource Accounting
- Organization of entire enterprises
- Voting and so on
Every day there are more and more new developments in this area, so you can already speaks about the widespread use around the world.
What is FORK cryptocurrency and its types
Speaking of cryptocurrency, one can not forget about such a concept as fork. It is due to the fact that Bitcoin is an open source software, so everyone has the opportunity to duplicate, modify and further use it for their own purposes, and this modification of the code is a fork, which means “plug “! Thus, fork is a change in the rules by which a block in a chain will be recognized as valid.
In the cryptocurrency segment, fork is a change in the existing rules of operation, which is directly related to the need for protocol transformation. Practice shows that once for the formation of Bitcoin, I had to resort to a fork , sometimes it is just a matter of safety and efficiency of the system.
Today there are 2 types of forks: soft (soft modification) and hard (hard modification):
- Soft Forms – in this case, when changing the rules, no software update is required in order for the new rules to be executed. If the code does not accept them, then the nodes can still interact with those nodes that already use the new rules. That is, softfork is a reversible change in the code, which does not upset the balance in the protocol.
- Hard forks – a slightly different situation. Here, the newly appeared rules strongly contradict the old ones; therefore, the nodes that did not accept them are not able to perceive information from the nodes that accepted them. Hardfork is a transformation of the mechanism of balance, so the network will be divided into 2 parts, and they will not be able to contact each other in the future, since the blocks that are recognized as valid in one of them will never be like that in the other.
Forks differ in encryption algorithms.
Attitude to cryptocurrency today and tomorrow
We can not say that the attitude to cryptocurrency today is unequivocal. From a legal point of view, its use is practically not regulated, although technologies such as, say, blockchains have long been recognized even at the state level.
We can say with confidence that today the authors of numerous projects are actively developing projects that can be applied in any service industry, in the economy, banking, medicine, or law. All of them integrate only the strong qualities of the blockchain:
- Maximum safety
Most obviously, these technologies will become part of interbank transfers, cloud services, software, logistics systems … This list can be continued for a long time, since the future of cryptocurrency and everything connected with it is huge.