Here Is All You Need To Know About Cryptocurrency: Theory For Binary Data Function

Cryptocurrency: An Overview

A cryptocurrency, crypto-currency, or crypto is a collection of binary data intended to function as a medium of exchange. 

Individual coin ownership records are stored in a ledger, which is a computerized database that uses strong cryptography to secure transaction records, control the creation of additional coins, and verify coin ownership transfers. 

Cryptocurrencies can generally considered as fiat currencies as they are not backed by or convertible into a commodity.

Validators are used in some crypto schemes to keep the cryptocurrency running. 

Owners use their tokens as collateral in a proof-of-stake model. 

In exchange, they gain authority over the token in proportion to the amount staked. 

Token stakers typically gain additional token ownership over time through network fees, newly minted tokens, or other similar reward mechanisms.


How It Works?

Cryptocurrency does not exist in physical form (as paper money does) and is not typically issued by a central authority. 

In contrast to a central bank digital currency, cryptocurrencies typically use decentralized control (CBDC). 

A cryptocurrency is considered centralized when it is minted or created before issuance or when it is issued by a single issuer. 

When implemented with decentralized control, each cryptocurrency operates via distributed ledger technology, most commonly a blockchain, which serves as a public financial transaction database.


The Digital Coin: Bitcoin

Bitcoin, the first decentralized cryptocurrency, was released as open-source software in 2009. 

Many other cryptocurrencies have been created since the release of bitcoin. 

Bitcoin has handled tens of millions of transactions worth billions of dollars. 

Users have been drawn to Bitcoin because of its decentralization, which relies on no single server or set of servers to store transactions and also avoids any single party that can ban specific participants or transactions. 

Bitcoin can only be transferred or paid by real owners thanks to cryptographic designs. 

This also ensures that money ownership and transactions in circulation remain anonymous. The total amount of bitcoin is extremely limited and scarce.

Who Invented It? 

David Chaum, an American cryptographer, invented e-cash, an anonymous cryptographic electronic money, in 1983. 

Later, in 1995, he put it into action with Digicash, an early form of cryptographic electronic payments that required user software to withdraw notes from a bank and designate specific encrypted keys before sending them to a recipient. 

This made the digital currency untraceable by the issuing bank, the government, or any other third party.


"How To Make A Mint"?

The National Security Agency published a paper titled "How to Make a Mint: the Cryptography of Anonymous Electronic Cash" in 1996, describing a Cryptocurrency system, first on an MIT mailing list and then in 1997.

Wei Dai published a description of "b-money" in 1998, describing it as an anonymous, distributed electronic cash system. 

Nick Szabo soon after described bit gold. 

A Bit About BitGold

Bit gold (not to be confused with the later gold-based exchange, BitGold) was described as an electronic currency system that required users to complete a proof of work function with solutions being cryptographically put together and published, similar to bitcoin and other cryptocurrencies that would follow it.

Satoshi Nakamoto, a presumably pseudonymous developer, created the first decentralized cryptocurrency, bitcoin, in 2009. 

In its proof-of-work scheme, it employed SHA-256, a cryptographic hash function. 

Namecoin, Litecoin, Peercoin & Internet Censorship

Namecoin was created in April 2011 as an attempt to form a decentralized DNS, which would make internet censorship extremely difficult. 

Litecoin has launched soon after, in October 2011. 

Instead of SHA-256, it used script as its hash function. 

Peercoin, another notable cryptocurrency, used a proof-of-work/proof-of-stake hybrid.

On August 6, 2014, the UK Treasury announced that it had commissioned a study of cryptocurrencies and the role, if any, they might play in the UK economy. 

The study was also supposed to recommend whether or not regulation should be considered. 

Its final report was published in 2018, and in January 2021, it issued a consultation on crypto assets and stable coins.

El Salvador became the first country to accept Bitcoin as legal tender in June 2021, after the Legislative Assembly voted 62–22 to approve a bill proposed by President Nayib Bukele to classify the cryptocurrency as such.

In August 2021, Cuba issued Resolution 215 to accept Bitcoin as legal tender, thereby circumventing US sanctions.

In September 2021, the government of China, the world's largest cryptocurrency market, declared all cryptocurrency transactions illegal, completing a cryptocurrency crackdown that had previously prohibited the operation of intermediaries and miners within China.

Written By: Komal Jha