What is Cryptocurrency?

What is Cryptocurrency?

Cryptocurrency is a type digital currency based on cryptographic mathematics and blockchain technology. Bitcoin is the first and most famous cryptocurrency although it was not planned for it to be a currency. Bitcoin was established to be ‘’A Peer-to-Peer Electronic Cash System’’ that is truly decentralized - having no central controlling authority.

In the 90s there were many attempts to invent digital cash, however, they all failed and Satoshi Nakamoto saw that all the centralized attempts were a failure so he tried something different he built the digital cash system without a central entity similar to a Peer-to-Peer network for file sharing such as Napster. After that decision a new cryptocurrency era was born.

Satoshi calculated that digital cash would need networks of payments with balances, accounts and transactions. However, there is one main problem that literally every payment network faces that is called double spending.

Double Spending

Double spending is when two or more people spend the same amount at the same time so there is no way of knowing which one is the first transaction. A decentralized network such as Bitcoin requires a number of verification confirmations of transactions before they are places on the blockchain. While this process is happening a double spend attack could occur.

In the cryptocurrency network only, miners will be allowed to confirm transactions, they do this by solving a cryptographic puzzle. They will spread them across the network when they take the transactions and validate them. After that, all the nodes within the network will be added to its database. When the transaction is successfully confirmed the miner will receive a reward and transaction. Additionally, once the transaction is confirmed it will become irreversible and unforgeable.

Principally, every cryptocurrency network is constructed on the absolute consensus of all the participants in regards to the validity of balances and transactions. Although, within the network, there are nodes if they disagree on a single balance the whole system would basically break. Nevertheless, there are rules programmed within the network to prevent this from occurring. 

What can you do with Cryptocurrency?

As of now there many merchants that accept cryptocurrency, well in this case mainly Bitcoin as it is more widely known and accepted. Bitcoins can use a form a payment for flights, hotels and even a college degree. Of course, there are variety of merchants from enormous retailers like Overstock and Microsoft to local shops, bars and restaurants that take Bitcoin as a form of payment. Although in the past, looking for a merchant that accepts cryptocurrency as a form of payment was tremendously difficult or even impossible.

On the other hand, digital currencies like Litecoin, Ethereum and more aren’t accepted majorly like Bitcoin just yet. It seems that changes are occurring for the better, since Apple has authorized at least 10 variety of cryptocurrencies to be acceptable as a form of payment on app store.

Moreover, cryptocurrency users can exchange their different coins for Bitcoins. However, there are websites that sell gift cards like Gift Off that accepts 20 different cryptocurrencies. Therefore, means you can mainly buy anything with cryptocurrency through gift cards and of course there are online marketplace that only accept cryptocurrencies like Bitify and OpenBazarr.

Read More on Crypto News Australia

The world of cryptocurrency is constantly changing. You can stay up to date with the latest Australian Crypto news here. Or, if you would like to learn more about digital currencies, then please visit our Guides section for more tips, advice, and information.

About the Author

Sam Deering

Sam Deering

Sam is a blockchain and cryptocurrency enthusiast, crypto trader, web developer, entrepreneur and also the founder of Crypto News Australia.