If you are not very familiar with cryptocurrencies or would like to get acquainted with its history, I recommend reading this post.
The science of cryptography was first used in the World War II to transmit military messages, but over time these cryptographies were applied to other fields as well.
Leading American scientist David Chaum first used the term cryptocurrencies, and experts have since paid more attention to the concept.
Cryptocurrency
is a type of virtual currency that uses cryptographic technology in its design
and is usually managed decentrally. Because cryptocurrencies are emerging
phenomena and new instances of them are created, their definitions have also
been mentioned in various sources.
Blockchain
technology was first introduced in the 1990s. In 2009, after the global
economic crisis, a decentralized cryptocurrency called bitcoin based on
blockchain technology was introduced by an unknown individual or group
nicknamed Satoshi Nakamoto. Hidden and untraceable. Institutions have
repeatedly tried to identify this person or group, but access to this identity
has become increasingly complex (it's exciting, isn't it?)
The security of these cryptocurrencies is ensured by encrypted algorithms, based on which it is possible to generate a certain amount of bitcoin per day. Perhaps the aim of the anonymous Satoshi Nakamoto was to prevent the uncontrolled production of unsupported money and the destructive inflationary effects of governments, as well as to build trust based on cryptographic algorithms, which is, of course, the most optimistic reason for the cryptocurrencies. This cryptocurrency was of little value at first because it was not accepted by the general public, but over time and with the increase in trust that arose, its price increased so much so that many people around the world wish they had bought and maintained it in the very first days of its existence (how about you?)
Expanding the use of cryptocurrencies in various fields
Bitcoin
is the most popular cryptocurrency, and since its inception, other
cryptocurrencies have emerged, each with its own unique features and
popularity, such as the Ethereum cryptocurrency created in 2013 by Vitalik Buterin,
and even in terms of technology. It was more advanced than Bitcoin. With the advent
of Ethereum, new concepts such as smart contracts and self-regulatory
organizations (DAOs) were formed in the world of cryptocurrencies, and we
witnessed a kind of revolution in this fledgling industry. Subsequently,
other cryptocurrencies such as Bitcoincash, Cardano, Lightcoin, Ripple, Lumen,
Monero, Zecash, Binancecoin and hundreds of other cryptocurrencies emerged.
Each of these cryptocurrencies has its own uses and features that have led to
its use in various industries, such as cryptocurrencies like Tether used to maintain the value of money (known as a stable coin) because of its
stability against common currencies. But the price of some other
cryptocurrencies, such as the stock market, fluctuates and can be used as a
tool for investment.
Despite the initial ambiguities and concerns, cryptocurrencies can now be exchanged, traded, bought online, etc., like other Fiat currencies (without backing), and the number of people who are attracted to this relatively young market is increasing every day.
In 2009, Bitcoin was created as the first decentralized
cryptocurrency. Since then, several cryptocurrencies have been created, many of
which are called alternative currencies or, in the most optimistic case,
serious competitors to bitcoin. The exchange of cryptocurrencies is subject to
national and international law, which can guarantee its recognition and
validity. Countries have not yet made a definite and transparent decision on
the legal use or production of this type of currency, although several
countries have recently tried to legislate and monitor this market.
Unique features of cryptocurrencies
Cryptocurrencies
have unique and attractive features that have led to their globalization and
growing popularity. The most important of these features are the following:
1.
Being digital
Cryptocurrencies are not physical in nature
and are just zero and one codes registered in the network. In fact,
cryptocurrency does not really exist and is only available in cyberspace.
2.
Decentralization
One of the important features of
cryptocurrencies is decentralization, for example, no institution controls
cryptocurrencies such as bitcoin and is not in the possession, authority or
ownership of a particular government or organization (one of the important
reasons why crypto market participants use these currencies as much as possible).
3.
Face to face exchange
Cryptocurrencies use a direct system to
trade. In this system, people can buy and sell digital currencies without any
intermediaries.
4.
Maintaining identity and
anonymity
When using cryptos, there is no need to
identify users and each user is identified by their digital wallet address. You
send some of the crypto to someone else whose wallet address you have, and the
recipient receives it. The whole network examines this process to make sure
everything is done properly and in accordance with the principles. The only
thing others know about you when transferring a digital asset is your wallet
address.
5.
Reduce costs and speed up
transactions
Because transactions and payments are made
directly between users, cryptocurrencies can eliminate the infrastructure,
processing, and costs associated with infrastructure and taxes by eliminating
intermediaries, unlike traditional payment methods.
6.
Simplicity and transparency
of transactions
Because it is possible to see all
transactions on the network in direct transactions with cryptocurrencies, this
system can contribute to a simpler and more transparent turnover (contrary to
what negatives believed).
7.
Controlling inflation and
preventing the improper production of banknotes
Cryptocurrencies are not generated
indiscriminately, and there is no government or organization that can produce
and market cryptocurrencies whenever it wants. A cryptocurrency like Bitcoin
has a limited number of coins (21 million bitcoins) that become more difficult
and complex to produce over time.
8.
Inclusiveness and
facilitation of business globalization
Crypto is a global phenomenon that no one can
control and no institution can boycott (which I think could be a way to
distribute justice to all the people of the world). Without the need for
intermediaries, these types of currencies can be transferred from anywhere in
the world to anyone and anywhere in the world. Of course, this remains a
double-edged sword and increases the risks of corruption and the existence of
baseless and useless money in societies.
The
unparalleled popularity cryptocurrencies has also provided a good opportunity
for cybercriminals to steal large sums of money by hacking user accounts and
hacking into the digital currency exchange platforms. The widespread hacking of
several large exchanges and their closure indicates this.
The
question is, how is crypto produced? Those who succeed in producing
cryptocurrencies are called miners and this process is called mining. Each time
the miners solve complex mathematical equations, a block is added to the
blockchain in the network. Extracting cryptocurrencies is a difficult
process requiring devices with enormous computing power and in some cases, very high
graphics power.
The
work process of miners can be summarized in 3 parts:
·
Get deals
·
Confirm and seal
transactions
·
Broadcast transactions on
the network
A
cryptocurrency, such as Bitcoin, is made up of peer-to-peer networks having no intermediaries such as banks or financial institutions, and retains the
history of all registered transactions; Therefore, the balance of each account
is also in it. The transaction is detected very quickly in any network, but the
confirmation takes place after a certain period of time. Confirmation of
transaction is an important concept in cryptocurrencies; It can be said that
the validity of the cryptocurrencies is due to the confirmation that occurs.
Until a transaction is approved, it cannot be determined whether the
transaction is genuine or counterfeit. Once a transaction is approved, it will
be irrevocable and can no longer be forged or canceled. The task of certifying
transactions is the responsibility of the miners, and in fact this is considered as
their job and in return for this, it is received as crypto pay.
The
phenomenon of cryptocurrencies and its widespread use in the world trade has
provided the basis for many countries around the world to be encouraged to use
these new technology-based financial instruments and to develop and approve
appropriate guidelines and policies accordingly. Based on this, we can boldly
consider the emergence of blockchain and a popular product of this technology,
namely cryptocurrencies, as one of the most important events of the last few
years.
The Differences and similarities between cryptocurrencies and actual money
There
are many differences between cryptocurrencies and common currencies, including the following:
·
Existential nature:
Crypto is not physical in nature but is a string of code that is registered on
the blockchain network, however, common currencies, such as dollar, pound and
euro, are physical in nature and their production and movement are
predetermined by the banking and government systems.
·
Backing: Backing
paper money is basically the gold in the government coffers, but cryptocurrencies,
on the other hand, do not have a specific backing. The cryptocurrencies
are backed by people's demand, acceptance and trust in the network.
·
Intermediaries: The
use of cryptocurrencies does not require intermediaries and the network works
on a peer-to-peer basis. In this system, any person without intermediaries can
send their currencies to another person, but to use paper money, users need
intermediaries such as banks.
·
Irrevocability: If
there is a problem during the crypto transfer and the crypto is sent to the
wrong address, it is not possible to return the currency, but in case of
mistaken transfer of paper money, it is possible to return the money with the
necessary follow-ups, so be sure to enter the right address.
Because cryptocurrencies are an important feature of
decentralization, their lack of control by a particular government, and the
anonymity of the owner, most governments see this type of currency as
destabilizing the monetary system and increasing crimes such as smuggling and
money laundering. Regulation of cryptocurrencies has become one of the biggest
issues for legislators in 2018, and many countries are still seeking to issue
guidelines for regulatory and legal issues in dealing with these currencies.
Authorities in some countries have been forced to ban cryptocurrencies instead
of resolving the issue due to the lack of legislation, or have used strict
authentication and property tax methods to curb them. Some other countries have
accepted the risk of capital outflows, allowing businesses to operate before
the law is enacted.
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