-cryptocurrency is a digital currency built with cryptographic protocols that make transactions secure and difficult to
fake.
-The most important feature of a cryptocurrency is that it is not controlled by any central authority: the decentralized
nature of blockchain makes cryptocurrency theoretically immune to the old ways of government control and
interference.
-Cryptocurrencies make it easier to conduct any transactions, for transfers are simplified through use of public and
private keys for security and privacy purposes. These transfers can be done with minimal processing fees, allowing
user to avoid the steep fees charged by traditional financial institutions.
What Are Cryptocurrencies Really?
If you take away all the noise around cryptocurrencies and reduce it to a simple definition, you find it to be just limited entries in a database no one can change without fulfilling specific conditions. This may seem ordinary, but, believe it or not: this is exactly how you can define a currency.
Take the money on your bank account: What is it more than entries in a database that can only be changed under specific conditions? You can even take physical coins and notes: What are they else than limited entries in a public physical database that can only be changed if you match the condition than you physically own the coins and notes? Money is all about a verified entry in some kind of database of accounts, balances, and transactions.
How miners create coins and confirm transactions?
Let‘s have a look at the mechanism ruling the databases of cryptocurrencies. A cryptocurrency like Bitcoin consists of a network of peers. Every peer has a record of the complete history of all transactions and thus of the balance of every account.
A transaction is a file that says, “Bob gives X Bitcoin to Alice“ and is signed by Bob‘s private key. It‘s basic public key cryptography, nothing special at all. After signed, a transaction is broadcasted in the network, sent from one peer to every other peer. This is basic p2p-technology. Nothing special at all, again.
