THE ORIGIN OF CRYPTOCURRENCY
The world would have to wait until 2009 before the first fully decentralized digital cash system was created. Satoshi Nakamoto’s creation was called Bitcoin. In his announcement of Bitcoin in late 2008, Satoshi said he had developed “A Peer-to-Peer Electronic Cash System”.
After seeing all the centralized attempts fail, Satoshi tried to build a digital cash system without a central entity. Like a Peer-to-Peer network for file sharing. The decision became the birth of cryptocurrency.
Bitcoin became more popular amongst users who saw how important it could become. In April 2011, one Bitcoin was worth one US Dollar (USD).
So, Bitcoin has succeeded where other digital cash systems failed. But why? What is cryptocurrency doing differently? The thing that makes cryptocurrency different from fiat currencies and other attempts at digital cash is blockchain technology.
WHAT IS BLOCKCHAIN?
In its simplest form, the blockchain is the technology that allows people to send and receive cryptocurrencies such as Bitcoin. However, it is far more than just a payment system. When Satoshi Nakamoto created the world’s first ever cryptocurrency (Bitcoin), he also created an amazing protocol known as the blockchain. The most interesting part to the blockchain is that no single person or authority has control over it. Instead, transactions are verified and confirmed by the online community, which makes it decentralized! The protocol has lots and lots of benefits such as transparency, speed, and security. A blockchain is a database of every transaction that has ever happened using a particular cryptocurrency.
Groups of information called blocks are added to the database one by one and form a very long list. So, a blockchain is a linear chain of blocks! Once information is added to the blockchain, it can’t be deleted or changed. It stays on the blockchain forever and everyone can see it. The whole database is stored on a network of thousands of computers called nodes. New in, formation can only be added to the blockchain if more than half of the nodes agree that it is valid and correct. This is called consensus. The idea of consensus is one of the big differences between cryptocurrency and normal banking.
The actual idea of blockchain technology is not only linked to financial transactions, as it has the potential to be applied to just about any industry!
As the blockchain is decentralized, everybody has access to the same data (unless it is a private blockchain used by companies). That means that as soon as a transaction is processed and confirmed, it appears on the blockchain for all to see.
This is very similar to a real-world accounting ledger, where the company accountant can view every transaction that has ever occurred, along with account balances. However, as blockchains such as Bitcoin and Ethereum are public, anyone can view the transactional data.