BTCNews is all about cryptocurrency. For the uninitiated, cryptocurrecy is the digital format of cash equivalent that can be transacted over an encrypted channel. They are cryptographic tokens that can be stored, sent back and forth over a network built using cryptographic algorithm. These tokens have a value associated with them and the transactions over the network are similar to fiat currency transaction in the real world, except that it happens between digital devices. The encryption is used to provide a secure environment for the creation and transaction of these tokens (read cryptocurrency or cryptocoins).
Bitcoin is one of the best examples of cryptocurrency. It was the first of modern day cryptocurrency to be created in 2009. Since then many alternatives to bitcoin have been created and they are collectively referred to as alternate cryptocurrency or altcoins.
Bitcoin was built over a SHA-256 bit encryption protocol. Similar to SHA-256, there are various other encryption protocols used by other altcoins. Cryptocurrencies were created as an alternative to traditional fiat currency. While there are many similarities between cryptocurrencies and fiat currency, they are completely opposite to each other when it comes to creation, governance and maintenance.
Fiat currencies like US Dollar, Pound Sterling, Euro etc. are a centralized form of money where the currency is issued by a central bank or the government of the respective nation and transactions occurs through a centralized network of banks who have control over the transactions. Unlike fiat currency, cryptocurrencies are decentralized forms of currency where no one single person or entity has absolute control over the creation and distribution. Cryptocurrency transactions happen over the network maintained via the community by contributing processing power to verify and confirm the transactions. All transactions occurring over the cryptocurrency network are recorded on a distributed ledger called blockchain.
Whenever a cryptocurrency is transferred from one wallet to another, the processing power is used to decrypt the token to access its information. The accessed information is compared with transaction data available on the blockchain. If the transaction data on the token matches with that on the blockchain, the transaction is executed by adding additional encrypted information to the token. The token will now contain certain identifying information about the recipient wallet. This process is called mining and it prevents users from double spending the same crypto-token also known as cryptocoin. Every single transaction on the cryptocurrency network will be recorded on the blockchain. The blockchain keeps growing as new blocks with recent transaction information is added to it. Once the information is encoded on the blockchain, it will be stored on it forever.
Mining is the process of verifying cryptocurrency transactions over the network by solving complex cryptographic equations. The processing power used to compute these calculations are supplied by miners, who are users on the network contributing the necessary processing power. These miners are rewarded for their contribution by allotting freshly generated cryptocurrency whenever a new block is discovered. These freshly assigned cryptocurrency will carry the same value as the ones that are currently in circulation.
Bitcoin is the most widely used cryptocurrency in the world. It was introduced for the first time in a white paper published by Satoshi Nakamoto. The white paper successfully garnered the attention of people from the tech community. In the following year, Bitcoin as a cryptocurrency was launched. Since then bitcoin has gained its fair share of positive and negative publicity. During its initial days, bitcoin was equated with game money only to be proven wrong in later days.
Bitcoin is built using SHA-256 encryption algorithm and Proof-of-Work protocol for mining. Since its inception, the currency has gained close to 6 million users and it has a current market capitalization of over $6 billion, the highest among all cryptocurrencies. The underlying blockchain technology has found extensive applications in other industries.
Mining bitcoin at the present difficulty requires specialized mining hardware like mining Application Specific Integrated Circuits (ASICs). These mining hardware supply processing power in terms of terahashes and petahashes to discover blocks and process bitcoin transactions over the network.
While Bitcoin uses SHA-256 encryption algorithm, some of the other encryption protocols used in altcoin includes Scrypt, x11, Diffie-Hellman exchange protocol and more. Some of the well-known altcoins include litecoin, dogecoin, monero, stellar and more.