Evolution of Cryptocurrencies / Digital Currency
Initial in the early 90s it was a time of tech rise when new platforms started to emerge bricks and click concept get the hype. An online system like Flooz, Beenz, and Digi cash emerged but the market inevitably seems to be failing. All these developed systems utilized the Third Party approach, institutions and companies working behind facilitated and give back to the process. Due to the acceptance of these systems faces failure. It was the time right before the dot com crash.
Digital algorithms-based framework called “Crypto-Currency” was developed by an unknown group of programmers which as known as ‘Satoshi Nakamoto’ and Digital-currency which is now globally known as ‘Bitcoin’ introduced. It is a completely decentralized and peer-to-peer digital cash system. I had mentioned decentralized which means no regulatory or intermediatory controlling authority exists. This peer-to-peer transaction concept is like the concept of P2P File Sharing Systems.
Payment problems and solution
One of the core problems that exist21 in previous networks was double-spending. It was a fraudulent technique in which the amount is charged Twice. This was found in the Third-party regulated payment systems. This method has authority on funds and personal details.
In the Bitcoin or cryptocurrencies, the network is Decentralized, every individual in the network need to do this Job through Blockchain — a Public Ledger where are the transaction that has ever occurred is recorded and available for everyone. Everyone in the network can see every account’s balance.
Every transaction in the block has a separate public key of sender and recipient which are generated wallet addresses and amount of coin is being transferred to the respective wallet. The transactions also needed to be signed off by the sender’s private key. This is the core working mechanism of cryptography.
Within a cryptocurrency network, only miners can confirm transactions by solving a cryptography puzzle. These transactions are marked as legitimate and spread across the network. Afterward, every node of the network adds it to the database and makes it visible across the block. Once the transaction is confirmed it becomes unforgeable and irreversible and a miner receives a reward, plus the transaction fees.
Are these cryptocurrencies being Legal or Illegal?
As cryptocurrencies are becoming more mainstream at the same time law enforcement agencies, tax authorities, and legal regulators across the globe are trying to understand the very concept of cryptocurrencies and trying to exactly do they fit in existing regulations and legal frameworks.
With the introduction of Bitcoin, the first-ever cryptocurrency, a completely new paradigm was created. Decentralized, self-sustained digital currencies that do not exist in any physical shape or form and are not controlled by any singular entity were always set to cause an uproar among the regulators.
There are lot of concerns that are raised regarding cryptocurrencies’ decentralized nature and their ability to be used almost completely anonymously. The authorities all over the world are worried about the cryptocurrencies’ appeal to the traders of illegal goods and services. Moreover, they are worried about their use in money laundering and tax evasion schemes.
As of November 2017, Bitcoin and other digital currencies are outlawed only in Bangladesh, Bolivia, Ecuador, Kyrgyzstan and Vietnam, with China and Russia being on the verge of banning them as well. Other jurisdictions, however, do not make the usage of cryptocurrencies illegal yet, but the laws and regulations can vary drastically depending on the country.
Most common cryptocurrencies
Bitcoin — The first ever cryptocurrency that started it all.
Ethereum — A Turing-complete programmable currency that lets developers build different distributed apps and technologies that would not work with Bitcoin.
Ripple — Unlike most cryptocurrencies, it does not use a Blockchain in order to reach a network-wide consensus for transactions. Instead, an iterative consensus process is implemented, which makes it faster than Bitcoin but also makes it vulnerable to hacker attacks.
Bitcoin Cash — A fork of Bitcoin that is supported by the biggest Bitcoin mining company and a manufacturer of ASICs Bitcoin mining chips. It has only existed for a couple of months but has already soared to the top five cryptocurrencies in terms of market cap.
NEM — Unlike most other cryptocurrencies that utilize a Proof of Work algorithm, it uses Proof of Importance, which requires users to already possess certain amounts of coins in order to be able to get new ones. It encourages users to spend their funds and tracks the transactions to determine how important a particular user is to the overall NEM network.
Litecoin — A cryptocurrency that was created with an intention to be the ‘digital silver’ compared to Bitcoin’s ‘digital gold.’ It is also a fork of Bitcoin, but unlike its predecessor, it can generate blocks four times faster and have four times the maximum number of coins at 84 mln.
IOTA — This cryptocurrency’s breakthrough ledger technology is called ‘Tangle’ and it requires the sender in a transaction to do a Proof of Work that approves two transactions. Thus, IOTA has removed dedicated miners from the process.
NEO — It’s a smart contract network that allows for all kinds of financial contracts and third-party distributed apps to be developed on top of it. It has many of the same goals as Ethereum, but it’s developed in China, which can potentially give it some advantages due to an improved relationship with Chinese regulators and local businesses.
Dash — It’s a two-tier network. The first tier is miners that secure the network and record transactions, while the second one consists of ‘masternodes’ that relay transactions and enable InstantSend and PrivateSend type of transaction. The former is significantly faster than Bitcoin, whereas the latter is completely anonymous.
— It’s a merger of Bitcoin’s and Ethereum’s technologies targeting business applications. The network boasts Bitcoin’s reliability, while allowing for the use of smart contracts and distributed applications, much how it works within the Ethereum network.
Monero — A cryptocurrency with private transactions capabilities and one of the most active communities, which is due to its open and privacy-focused ideals.
Ethereum Classic — An original version of Ethereum. The split happened after a decentralized autonomous organization built on top of the original Ethereum was hacked.