When it comes to cryptocurrencies, there’s been a lot of hype but little information. That’s why we’re here to help. In this post, I will explain the basics of cryptocurrency. Here we’ll describe the crypto-mining process, explain the difference between POW and POS protocols, and go a bit beyond understanding how to create your own cryptocurrency or financial platform.
Most people who know about cryptocurrency don’t really understand it. There’s a lot of confusion around what cryptocurrencies are, how they work, why you’d use them, and even how to find one that’s right for you. Put simply, cryptocurrencies are digital collectives of coins that have value outside of their supply via participation in a distributed network of nodes.
What is cryptocurrency?
The basic premise of cryptocurrency is that its digital money.
A short answer: cryptocurrency is a decentralized peer-to-peer network of computers running on the Ethereum network. It operates without a central authority and enables anonymous, customizable processing of transactions. These can be used to purchase services or make purchases of goods and services on the open market. Cryptocurrencies are also referred to as crypto, digital currency, cryptoeconomics.
Cryptocurrencies are digital currencies created using cryptography and a new type of distributed ledger called a blockchain. Cryptocurrencies are not issued by a central bank or any government entity. Instead, cryptojets are managed by a decentralized peer-to-peer network with a public address that is unique to a particular cryptocurrency. And the value of a cryptocurrency is based solely on supply and demand.
Cryptocurrencies are digital collectible tokens. These can be used to represent any kind of asset, from tangible goods to services or even currency. Tokens can be created using scripting languages called ethereum ( Ether for short) or bitcoin (BTC), and they can be stored on a blockchain.
Among the first digital assets, the most popular and well know even nowadays is bitcoin. It’s created through a process known as minting. Every coin is created through a computer algorithm called a’miner.’ Miners work by solving complex math equations and creating new blockchain blocks based on their work results. The network effect develops when more people join the network because they can earn tokens by efficiently solving complex mathematical computations. The quantity of bitcoins is limited and predefined. And the process of mining became more complicated and power-consuming. Many people switched to other cryptocurrencies.
How new crypto assets came to life?
In the cryptocurrency world, it is common to hear people referred to as “pearls.” This is a reference to the decentralized, public ledger that is used to record all transactions in cryptocurrency. The concept of peer-to-peer technology has become a term that is synonymous with cryptocurrency.
POW (Proof of Work) and POS (Proof of Stake) are two blockchain creation methods used in cryptocurrency mining. There’s no one-size-fits-all answer when it comes to choosing which is best for your situation, but we’ll cover both and try to figure out a situation where either POW or POS makes sense.
POS (Proof of Stake) cryptocurrencies are generated by computing power and called into action by miners to confirm transactions. IN POS, the rewards are shared among those who contribute with their computer power to computation the new block in the chain.
POW (Proof of Work) is a new form of crypto technology that utilizes a consensus mechanism to hash a block and rewards participants for contributing to that block by performing a number of actions on that block. The coins generated from POW are called “”mined””, and can be used to purchase specific goods or services at specific exchanges. The person who generates the block has the most influence over the system since he/she controls resources’ which are necessary to continue mining.
Cryptocurrencies are a new way to buy, sell and trade assets that have real-world value. By reducing the middleman and leveraging blockchain technology, cryptocurrencies can let anyone send money anywhere in the world with any asset.
The situation with crypto is similar to email before it was widely used but taken further in that it allows for peer-to-peer transactions with little or no involvement from a central authority. This is very different from traditional methods of currency used as permitted by governments, banks, and other entities, which helps make it worth investing or holding a cryptocurrency. As more and more businesses and individuals begin to understand the capabilities of cryptocurrencies, they will start to accept them as payment methods instead of traditional methods of payment. The true potential of cryptocurrencies lies within their ability to revolutionize the global economy and eliminate many of the annoying steps involved in doing business.
If you will be among the pioneers who create the financial platforms for peer-to-peer transactions, the chances that we’ll see your name among the FORBES richest man list of the year is very high.