Cryptocurrency 101
Most of us heard about cryptocurrencies. But what is cryptocurrency? And how can I get it?
The best way to describe what cryptocurrency is would be calling it digital money. Cryptocurrency is created from code, encrypted (hence the crypto part of the name) and controlled using P2P (peer to peer) internet protocol.
It all started in 2009 when a group of anonymous posters that went by Satoshi Nakamoto created and made Bitcoin available to the public. It was the first form of currency that was decentralized. Other currencies such as the American dollar, the British pound or euro are centralized. It means that they are controlled by banks, tax organizations and other third parties. Bitcoin was and still is controlled by every transaction that users make.
Cryptocurrency is generated by solving complex cryptologic puzzles. If you dedicate a part of your computer’s resources to solving that puzzle and find a solution, you will be reimbursed with cryptocurrency. The more computing power you invest, the bigger the reward. Computers that are a part of this solution finding network are called nodes, and people who own them are called miners.
The basic technology behind cryptocurrency is really simple and relies on so-called blockchains. Blockchains are databases that every cryptocurrency miner has stored on their node. When you make a transaction using regular currency, a central server takes note that certain amount of money is reserved for a specific transaction. That way you cannot use that money to buy something else and you avoid double-spending — using already spent money to purchase something else. Since cryptocurrency has no central server, it uses nodes within the network to control and record transactions. When you make a transaction using cryptocurrency, your transaction is approved and verified using P2P network of nodes. After that, your transaction is inserted into a blockchain as a new block. That blockchain is then updated on every computer in the network and everyone has your block with transaction information (timestamp, amount, etc) making it impossible to alter and avoiding double-spending.
In the early days of cryptocurrency mining anyone with a strong computer could venture into cryptocurrency mining. You could just download the mining software and start earning your cryptocoins. Nowadays it takes more than just having a strong computer to mine cryptocurrency. Custom built mining hardware is currently dominating the market alongside cloud mining services that have a monthly fee. The next step after buying or renting a mining node is joining a mining pool — a community of miners which work together to earn cryptocurrency. The final step is setting up a cryptocurrency wallet to safely store your cryptocoins.
As you can see it’s not that hard to start mining. The only thing that you need is some money to invest in proper mining hardware and some patience for your investment to return. And since cryptocurrency value (especially Bitcoin) has already reached $7000 dollars, you probably won’t have to wait for long.
