How does a cryptocurrency work?
Greetings friends of Steemit, this time I come to talk about the fascinating world of cryptocurrencies in a simple way for easy understanding.
The blockchain of bitcoin was registered in 2008 and despite criticism from financial regulators, institutions, governments and the media it had a huge increase in value. Only between 2009 and 2013 the value of just one currency went from $ 0.1 to more than $ 1,100.
People who had invested in bitcoin became multi-millionaires in a relatively short period of time and is probably one of the most famous economic successes in financial history. One of them was a young Norwegian who invested $ 26 and forgot about it and a couple of years later his modest investment had become more than $ 850,000, it was a real lesson for anyone who was introduced to bitcoin in the first stage but he rejected it.
What would happen if the new technology allows everyone in the world to be their own bank, free of taxes and bank fees?
The cryptocurrency is built on mathematics, technological computer software with a shared code that connects a global network through the internet, but How do we know if it can be trusted?
Traditionally we are programmed to depend on trusted third parties such as credit card companies and remittance services because they keep a record of money that is transferred from one to another and they are charging us enormously for it. We have the habit of paying a lot of money for something that could be free. Most rely so much on banks that they think they can be solid, honest and reliable but there are ways that these intermediaries can cut by charging huge amounts that are cheaper, safer and faster. while many people associate it with anonymity, negotiation in the black market but in reality it is far from being more transparent than you imagine, just think about it.
Nowadays you can download music and movies online easily and the cryptocurrency is digital, just like music and movies on the internet, so pay close attention because it is the key to understanding cryptocurrencies.
You can trust that your digital money will not be downloaded as easily as your favorite songs or movies.
How can a digital currency preserve its value and not be copied online?
The interesting thing about cryptocurrency is not a file on the computer, it is rather an entry in the publicly distributed database called the Blockchain.
Compared with today's banks, they keep ledgers of each transaction with a positive and negative in the databases. The bank accounts of cryptocurrencies are replaced by an E-Wallet (electronic purse) where only you can control it. The cryptocurrency general ledger is the Block Chain. These keep a record of each currency and each transaction never made and always balanced since the amount of coins can not be changed and the currency will never leave the system. When a coin is sent somewhere, what is really sent is the control of the database with a code that is a unique key for that specific transaction. As transactions are made, the general ledger and block chain are constantly synchronized around the world. Each user in the entire network has an identical copy and since the chain of blocks is public it can not be controlled by any person. There is no single point of failure to hack the block chain, hackers would have to go to multiple geographic locations, all at the same time, it may not be impossible but it makes it much more difficult and it is much safer than the current banking system .
The whole system has the potential to replace banks and bankers around the world, many people are happy with the system we have today simply because they do not understand it or do not realize the amount of money we pay to our current financial system in commissions every year. The cryptocurrency is the opposite of today's banking system since it is completely transparent and nobody can change it, either the amount of coins or the mathematical rules that dictate the creation once the work is started. Therefore the cryptocurrency through the unlimited amount of coins is impossible to inflate. The currency has the potential to make our world fairer. Nowadays millions of people live without a bank account while many more have a smartphone and that can give them access to a global personal banking system through cryptocurrency technology, banking for all. The cryptocurrency is to the bank what the internet is to the telephony but the most exciting of all this is what we will see in the future.
