When somebody specifies cryptographic forms of money, the primary inquiries individuals pose are for the most part: What is it, where does it come from? - and after that the principle answer would be: I know, it's Bitcoin.
Bitcoin
In any case, over 10 years has passed since the appearance of Bitcoin. During that period, a ton of misguided judgments emerged, so it could be ideal to begin from the start to all the more likely comprehend what digital currencies are.
Everything began in 2007 with the emergency in the US which formed into a worldwide monetary emergency with the breakdown of numerous huge banks and monetary establishments.
In 2008, a gathering of engineers drove by Satoshi Nakamoto introduced one basic inquiry: Why might a bank or an outsider be required for two individuals to pay one another?
On the off chance that I need to purchase something from you or you need to purchase something from me, for what reason would it be advisable for us to believe xy bank that they will effectively trade that cash between us - when you and I can do it without anyone else's help?
On account of this perspective - Bitcoin was made which is basically planned so I pay you straightforwardly or you pay me straightforwardly without the intercession of an outsider - whoever it is; a bank, state, or some monetary association to trade cash.
Bitcoin is a computerized adaptation of money. So in the event that I give you or you money to me, nobody on the opposite side should be included. Bitcoin fills in as an online rendition of a similar interaction
What is Blockchain?
Blockchain advances are in squares of data (not cash itself) associated in one major chain.
In the event that you break that chain into the totally most rudimentary part, Blockchain is a computerized record of human trust.
Individuals are ordinarily a transitory marvel, you can mislead me, I can deceive you, banks can mislead us, and so forth Nonetheless, imagine a scenario where there is an approach to eliminate the human factor from exchanges.
Bitcoin was quick to succeed on account of Blockchain innovation, which is one huge decentralized data set. It very well may be seen by everybody, and once recorded, the information can never be changed again. So nobody can say that the cash was not sent anywhere. When I send you or me 1 Bitcoin, the whole Blockchain network distributes it, registers it and that data stays written in it until the end of time.
One of the misconceptions about Bitcoin is that it is some crazy anonymous currency where money can simply evaporate and disappear. It is true that this is one of the most accurately written decentralized databases that exists on our planet today with which we eliminate the need for a third party in the payment process, because transaction data remains forever recorded among everyone within the network.
This is also the core value of blockchain technology, which is why it is spread and introduced into other transactions between people, regardless of money.
Example: imagine buying a used car, and all the information about the car - from its inception to the present day - is recorded and unchanged comes with it. You can see exactly how many kilometers he covered, when, how, where he was serviced, how many owners he had…
So, understand blockchain technology such as the internet. The Internet is one connected decentralized network in which there is Facebook, Amazon, Google, etc. You will never say that Facebook or Google are the Internet.
Likewise, Blockchain technology is a networked database in which there are cryptocurrencies, medical records, insurance policies and many other different businesses that use blockchain technology in their work.
What does just paying look like and is it mining a difficult and complicated job?
The document stating that Goran is sending Kristina 1 BTC is digitally signed.
When I digitally sign and approve it, the data is sent to the network from one digital address to another - until all the digital addresses on the network receive that data.
Then the miners can confirm the accuracy and correctness of the transaction, which is their job within the network, and for which they receive a reward from the network in the form of cryptocurrency. The moment the miners confirm the transaction, it becomes part of the blockchain. In this way, mutual transactions are carried out, and the participants themselves have an economic interest in participating in them.
Anyone can be a miner, all it takes is to assign part of the power of your computer to the network for this job. In this way, fully independent participants are encouraged to voluntarily maintain the work and legitimacy of the network. This consequently solves all possible problems that may arise during transactions between people because one piece of information about one transaction must be recorded on each computer within the network.
Why cryptocurrencies? What are the pros and cons?
Advantages of cryptocurrency
Bitcoin, Ethereum, Ripple, Litecoin… Some data for 2020 say that there are over 5000 different cryptocurrencies.
Their expansion and popularity are due to the advantages they have over classic (FIAT) currencies, and here are some of them.
1. Cryptocurrencies have no inflation.
Inflation over time makes the value of each FIAT currency decline due to additional printing. Almost every cryptocurrency at the time of its creation has a limited amount in circulation. So, for example, the maximum amount of Bitcoin, in theory, could be 21 million. As the need for a currency grows, so does its value - which prevents inflation in the long run.
2. Cryptocurrencies are maintained and managed by themselves, ie the transactions themselves are stored on the miners' computers.
Because miners receive compensation for their work, they conduct transactions accurately, up-to-date, on time, keeping cryptocurrency data decentralized.
3. Privacy and security has been the core value of any cryptocurrency since its inception.
Blockchain technology is based on complicated cryptography that is difficult or almost impossible to decode. This makes cryptocurrencies much more secure than traditional electronic transactions.
For better security and privacy, cryptocurrencies use pseudonyms that are not associated with a person, account, or recorded data that can be associated with an individual.
4. Currency exchange is much easier.
Today, any FIAT currency can be purchased using a variety of electronic wallets with minimal transaction costs.
5. Decentralization.
Most cryptocurrencies are decentralized. This means that there is no control by individuals, institutions or groups of people that can affect the value of a currency, the amount of currency in circulation as is the case with FIAT currencies controlled by governments.
6. Cheaper transactions.
One of the main advantages of sending cryptocurrencies around the world is that the cost of sending is almost non-existent. Eliminating third parties such as banks, cards, Paypal and similar money transfer services eliminates additional transaction costs.
7. Fast transfer of funds.
International or domestic transfer of cryptocurrency occurs almost at the speed of light. Because transfer verification takes place within the network itself without third party interference.
Disadvantages of cryptocurrency
1. Can be used for illegal transactions.
Because the privacy and security of cryptocurrencies is high, it is very difficult to identify any person through their wallet address or other data.
So with Bitcoin on the dark web you can buy weapons, drugs and whatever comes to mind. Likewise, cryptocurrencies are used to launder illegally acquired money through legitimate and legal intermediaries - to hide the source of that money.
2. Loss of data can cause loss of finances.
Namely, the developers wanted to create code that is impossible to track with very strong protection against hackers and impenetrable authentication protocols. In practice, this means that holding funds in cryptocurrency is safer than keeping physical money in any safe deposit box of any bank.
However, by losing your private key from your electronic wallet, the money remains forever locked and inaccessible.
3. Although decentralized, someone manages them.
Cryptocurrencies have been known to be decentralized since its inception. However, the circulation and quantity of a particular currency in the market can be controlled by its creator or an organization of people with a large amount of currency.
So we can see that even Bitcoin has huge oscillations in value. In one day, its value can fall or increase by 30% or more.
4. Some cryptocurrencies are not available in FIAT currencies.
Some cryptocurrencies must first be converted into Bitcoin or Ethereum before being converted into a FIAT currency. This conversion incurs additional, unnecessary costs.
5. No refund or cancellation of the transaction.
If there is a dispute between the interested parties or someone mistakenly sends the money to the wrong e-wallet address, the money cannot be returned to the sender.
