What is a cryptocurrency?

 2019-11-18 09:16:12

Many people regard the "blockchain" and "cryptocurrency" as equivalent concepts. This article analyzes the concepts of cryptocurrency and the key differences and the relationships between them.

A cryptocurrency is a digital or virtual currency that is intended as an exchange medium. The price of a cryptocurrency depends on Bitcoin became the first decentralized cryptocurrency in 2009, after which the term cryptocurrency refers to this type of design.

Since then several similar cryptocurrencies have been created, often referred to as altcoins. The cryptocurrency is based on a decentralized consensus mechanism, as opposed to a banking financial system that relies on a centralized regulatory system.

The cryptocurrency other than Bitcoin, also known as the altcoin is partly based on the idea, principle, and source code of Bitcoin. The virtual currency similar to Bitcoin currently has more than 800 altcoins.

From February to April 2017, the total proportion of the altcoin currency in the total value of the cryptocurrency market increased from 15% to nearly 40%.

Since Bitcoin itself does not have an authoritative issuer and state power to maintain its authority and uniqueness, Bitcoin and its imitators can only get along with each other equally, although it is the earliest virtual currency, the most well-known and most familiar. , also has the largest user network community, has a strong network effect, most of the time is also the highest value of the cryptocurrency, but does not have an absolute exclusive status.

To better understand Cryptocurrency, we need to get some idea about blockchain.

The easiest way to understand the blockchain is to treat it as a completely transparent and constantly updated exchange of information, through a personal computer network, a system that no one has.

It is an intelligent peer-to-peer network that uses distributed databases to identify, disseminate, and document information, also known as the value Internet. In 2008, Nakamoto confirmed the concept of “blockchain” in Bitcoin White Paper.

The cryptocurrency runs on blockchain technology. In other words, the blockchain is the underlying technology for cryptocurrencies and can be implemented in many other industries outside of finance. Encryption is often a requirement for trading on a blockchain. However, without a blockchain, we cannot record and transfer these transactions.

First, understand that bitcoin is not equal to the blockchain. Because Bitcoin is more popular than its underlying technology (blockchain), people become confused between the two. The blockchain enables peer-to-peer transactions to be recorded in distributed ledgers throughout the network. Bitcoin is a cryptocurrency that can be exchanged directly between two people without having to go through a third party like a bank.