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Iceni Magazine | November 11, 2019

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A short history of bitcoin and cryptocurrency

A short history of bitcoin and cryptocurrency

Cryptocurrency is digital currency which makes use of cryptographical roles to perform online transactions.

Cryptocurrency control the blockchain technology so that they can become decentralised and apparent. The most important thing to remember about cryptocurrency is that it is not controlled by any central authority system which means that it cannot be controlled or influenced by government. You can buy and sell bitcoin online, making use of private and public keys. The transfers are carried out with little processing fees which traditional financial institutions charge.

Cryptocurrency has become a worldwide sensation which most people are familiar with nowadays.

History

Cryptocurrency originates back to the early 1980’s when a binding algorithm was created by David Chaum, which today remains central to the encryption process. Later, after he relocated to the Netherlands he created DigiCash which was a company that produced currency that was based on the blinding algorithm. However, DigiCash was not decentralised like bitcoin. Chaum’s company was in control of the supply of these digital currencies.

In the US the most notable digital currency was known as e-gold which was created and controlled by a Florida based company.

Bitcoin is regarded by many as the first real cryptocurrency that could be used by the public. Satoshi Nakamoto who is believed to be the founder of bitcoin, the most popular and important virtual currency, never really intended to create a currency.

In 2008 Satoshi announced bitcoin, and called it a peer to peer electronic cash system. He aimed to invent something that would be a decentralised digital cash system. Prior to this, many people tried to invent similar products however they failed.

This prompted Satoshi to create a decentralised digital cash system and his decision was the beginning of the cryptocurrency. At the beginning pf 2009 he introduced bitcoin to the public and supporters began exchanging the currency. In 2010 another currency emerged known as Litecoin together with a host of newer cryptocurrencies like Ripple and Ethereum.

In 2012 WordPress was the first global merchant to accept payments made in bitcoin.

How does cryptocurrency work?

Since there is no central server in a decentralised network, every unit on the network has a specific task to complete. They each need to have a list of all transactions that were completed in order to ensure that the future payments are valid or an attempt to double spend.

If there is any disagreement from any unit then the whole transaction is invalid. There must be complete agreement in order for any transaction to be valid.

The codes and controls that secure cryptocurrencies are compound however the average individual is able to understand the basic concepts associated with cryptocurrency. It is believed that most cryptocurrencies are variations on bitcoin itself.

Distinct properties of cryptocurrencies

  1. They are irreversible: once you have received a confirmation, you will not be able to reverse your transaction. Once the money has been sent, it cannot be undone by anyone.
  2. Pseudonymous: the transactions and the accounts are not connected to real world identities. Bitcoins are received on addresses containing 30 characters. Although you will be able to view the transaction flow, you cannot connect with the people that they belong to.
  3. Worldwide and quick: transactions can be completed almost instantaneously on the network. They do not depend on your location as they are done on a global computer system.
  4. Secure: the fund are locked in a public key cryptography system where only the owner of the key will be able to connect. These addresses (keys) make bitcoin very secure.
  5. You don’t require permission: you do not need to get permission for using cryptocurrency. Anyone is able to download the software free of charge. Once it is installed on your computer you can begin sending and receiving bitcoin and other cryptocurrencies.

What is a block chain?

Block chain is the archive of records of prior transactions and activities. It validates the ownership of the units of currency at a given point in time. The block chain contains is fixed and contains a vast number of transactions that increase over time.

A transaction with cryptocurrency is not considered finalised unless it has been recorded onto the block chain, which can be done in minutes.

The idea of digital currency is exciting with hopes of improving global finance however despite its success thus far, it still remains a work in progress even though it is based on sound independent principles.


 

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