A cryptocurrency is a medium of exchange like normal currencies like the USD, but designed for the purpose of exchanging digital information through a process made possible by certain principles of cryptography. Cryptography is used to secure transactions and control the creation of new currencies. The first cryptocurrency that was created was Bitcoin in 2009. Today there are hundreds of other cryptocurrencies, often called Altcoins.
Put another way, cryptocurrency is electricity converted into lines of code with monetary value. In the simplest form, the cryptocurrency is the digital currency. There are many applications that have been created for cryptocurrencies, including bitcoin robots and other trading apps. Bitcoin Bank, one of the most known bitcoin robots, has revolutionised the way people engage with Bitcoin and other cryptocurrencies.
Unlike centralized banking, such as the Federal Reserve System, where governments control the value of a currency such as USD through the process of printing fiduciary money, the government has no control over cryptocurrencies since they are completely decentralized.
Most cryptocurrencies are designed to reduce their production over time, such as Bitcoin, which creates a market cap. That is different from fiat currencies, where financial institutions can always create more, hence inflation. Bitcoin will never have more than 21 million coins in circulation. The technical system on which all cryptocurrencies are based was created by Satoshi Nakamoto.
While there are hundreds of different cryptocurrency specifications, most are derived from one of two protocols; Work proof or participation test. All cryptocurrencies are maintained by a community of cryptocurrency miners who are members of the general public who have configured their computers or ASIC machines to participate in the validation and processing of transactions.
History of the Cryptocurrency
The first cryptocurrency was Bitcoin. Bitcoin was created in 2009 by a pseudonymous developer named Satoshi Nakamoto. Bitcoin uses SHA-256, which is a set of cryptographic hash functions designed by the US National Security Agency. UU Bitcoin is a cryptocurrency that is based on the work test system.
In April 2011, Namecoin, the first altcoin, was created to form a decentralized DNS to make Internet censorship more difficult. In October 2011, Litecoin was launched and became the first successful cryptocurrency to use scrypt as a hash function instead of SHA-256. This gave the general public the ability to extract litecoins without the purchase of specific hardware, such as the ASIC machines used to extract Bitcoin..
Litecoin began receiving media attention at the end of 2013, reaching a market limit of $ 1 billion. Ripplecoin, created in 2011, was built with the same protocol as Bitcoin but services as a payment system: think of it as a Paypal for cryptocurrencies that supports any fiduciary currency, cryptocurrency, merchandise or even frequent flyer miles.
Cryptocurrencies and market capitalization
Bitcoin is the largest cryptocurrency in terms of market capitalization, volume, acceptance and notoriety, but it is not the most valuable currency. NEM, although it only has a market capitalization of $ 1,116,720, trades at $ 1,117 per currency. Looking at the market limit, Litecoin ranks second after Bitcoin with Ripple nearby.
One of the coins you are probably familiar with is Dogecoin. Dogecoin occupies, on average, the third place in the volume of operations, but has a relatively low market limit, occupying the sixth place in the largest cryptocurrency.
What is a Cryptocurrency hash?
The mining power of the cryptocurrency is classified on a hash scale per second. A computer with a computing power of 1kH / s extracts at a speed of 1000 hashes per second, 1MH / s is one million hashes per second and a GH / s is one trillion hashes per second. Each time a miner resolves a block successfully, a new hash is created. A hash algorithm converts this large amount of data into a fixed-length hash. As a code, if you know the algorithm, you can solve a hash and get the original data, but for the common eye it is just a bunch of grouped numbers and it is still practically impossible to get the original data.
SHA vs. Scrypt
While Bitcoin and several other currencies are extracted using SHA-256, Litecoin and many other currencies, use Scrypt. These are the two main hash functions, but there are several different types and they are used by other cryptpcurrencies such as scrypt-N and x11. The different hash functions were adopted to respond to concerns with the SHA-256. Before, people could extract Bitcoin with their GPUs, which require a lot of energy. But as Bitcoin grew in popularity, ASIC SHA-256 machines were built that made GPU mining obsolete..
To give you an idea of how powerful these machines are, a mining platform with 4 GPUs would have a hash rate of around 3.4 MH / s and consume 3600kW / h while an ASIC can extract 6 TH / s and consume 2200kW / h . This effectively killed the GPU extraction and left many people concerned about the security of the network. With fewer people who can usefully extract from their home computer, the network is decentralized. Scrypt mining was implemented with the promise of being resistant to ASIC due to the memory problem that it introduced.
Scrypt hash algorithms require a lot of memory, that GPUs are already designed to handle and ASIC machines are not. However, Scrypt mining requires a lot of energy and is finally deciphered: the ASIC machines were designed to solve this problem. At this point, Litecoin considered changing its test function to avoid ASIC mining. Scrypt also tense that his work test is much more efficient than SHA-256. Bitcoin blocks are resolved at a rate of 1 for 10 minutes, while Litecoin blocks are resolved at a rate of 1 for every 2.5 minutes.
The security of cryptocurrencies is two parts. The first part comes from the difficulty to find hash set intersections, a task performed by the miners. The second and most probable of the two cases is a “51%” attack. “In this scenario, a miner who owns the mining power of more than 51% of the network can take control of the global blockchain ledger and generate a chain block alternative Even at this point, the attacker is limited to what he can do.The attacker could revert his own transactions or block other transactions.
Cryptocurrencies are also less susceptible to seizures by law enforcement and acquirers of transactions such as Paypal impose them. All cryptocurrencies are pseudo-anonymous and some coins have additional functions to create true anonymity.
Cryptocurrency legality and taxes
In the USA UU., The IRS has ruled that Bitcoin should be treated as a property for tax purposes, which makes Bitcoin subject to capital gains tax. The Financial Crimes Enforcement Network (FinCEN) has issued guidelines for cryptocurrencies. The guidelines issued contain an important warning for Bitcoin miners: it warns that anyone who believes bitcoins and exchanges them for fiat money is not necessarily beyond the reach of the law. Affirm: While cryptocurrencies are legal in most countries, Iceland and Vietnam are an exception: Iceland, mainly because of its currency freeze, are not free of regulations and restrictions. China has banned financial institutions from handling bitcoins and Russia, saying that the cryptocurrency is legal, has made it illegal to buy goods with any currency other than Russian rubles.
“A person who creates units of convertible virtual currency and sells those units to another person for a real currency or its equivalent is dedicated to the transmission to another location and is a transmitter of money.”.
The miners seem to belong to this category, which theoretically would make them responsible for the MTB classification. This is a bone of contention for the bitcoin miners, who have asked for clarification. This issue has not been addressed publicly in a court of law to date..
There is a great amount of services that offer information and monitoring of cryptocurrencies. KoinMarketcoin is an excellent way to control the market limit, the price, the available supply and the volume of cryptographic currencies. Reddit is an excellent way to stay in touch with the community and follow the trends and CryptoCoinCharts is full of information ranging from a list of cryptocoins, exchanges, information on arbitrage opportunities and more. Our own site offers a list of cryptocurrencies and their change in value in the last 24 hours, weeks or months.
Liteshack allows visitors to see the network hash rate of many different currencies through six different hash algorithms. They even provided a graph of the hash rate of the networks so that it can detect trends or signs that the general public is gaining or losing interest in a particular currency.
A handy website for miners is CoinWarz. This site can help miners determine which currency is the most profitable for the mine, given its hash rate, power consumption and the current rate of coins when they are sold by bitcoins. You can even see each currencies current and past difficulty.