What is cryptocurrency
What is cryptocurrency?
The world no longer deals in “commodity” money, money back by gold or some other precious commodity, the global currency system is now called the “fiat system” and is based on a government mandate that paper currency is legal tender because it is backed by the full “faith and credit of the government that issued it”. Markets and central banks then value the relative worth of the currency based on the perception of how a particular country is governing itself, the current state of the economy and the effects those two factors have on interest rates. So now, basically what backs money is irrelevant and perception is what matters, money has value because we believe it to be so. If we can trade our money for goods, it has value to us. When looking at “exotic’ currency, the best things to look at are things such as, the ability to buy goods and service, established history, and community size, Bitcoin and other digital currencies undeniably fulfills all those requirements.
When talking about Cryptocurrency the word “blockchain” is invariably brought up but what is blockchain and what does it have to do with cryptocurrency? Blockchain is a distributed ledger that allows information to be recorded and shared in a community. Blockchain replaces the third party intermediary in our every day money transactions by using complex algorithms to authenticate ownership. There are two physical components to blockchain, the nodes and the miners. A node is a complete copy of the blockchain and is able to verify all transactions; a miner creates blocks in the blockchain, which the nodes keep. Cryptocurrency is a peer-to-peer transaction because of blockchain; verification is instant and held within the system, which voids the need for third party verification.