What is a Cryptocurrency

What is crypto currency? The answers to all questions

The crypto currency definition with one word is not possible at all. Therefore, we have addressed the complex question “What is crypto-currency” and show the full potential behind the technology trend, which can also bring a turnaround in financial transactions and transactions. It all began in 2009 with Bitcoin, when resourceful developer Satoshi Nakamoto introduced the first official block-chain-based currency. In the years that followed, countless more came onto the market, and there are now more than 2,600 crypto currencies. What is behind all this is revealed in this article.

  • Bitcoin was the first block chain-based currency in 2009
  • Meanwhile there are more than 2,600 crypto currencies
  • Bitcoin still dominates the crypto market
  • Not every block chain is suitable for anonymous transactions

What is crypto currency? Definition and explanation of trading

What is a crypto currency? This question was first officially addressed by the public in 2008, when the crypto-currency white paper was published. What many people do not know, however: There had been research and ideas about block chain technology and the associated crypto currencies many years before. However, it was to take many more years before the understanding of a currency beyond the well-known fiat money found its way into people’s minds.

CRYPTO CURRENCY WHAT IS IT?

We are trying to come up with a crypto-currency explanation that is not too technical. But basically it is the technology behind Bitcoin and Co. that makes crypto currencies so unique. They do not exist in physical form, as is the case with the coins and bills in Euro or USD, instead they are provided digitally. But also is not completely exact, as the crypto currency definition shows. For example, there are no virtual Bitcoin bills as a digital image; the coins are rather made up of strings. The cryptographic encoding of a coin and the associated transactions have finally given the crypto currencies their name.

WHAT IS THE CRYPTO CURRENCY? NOT AN OFFICIALLY RECOGNIZED CURRENCY

Crypto currencies work on the basis of block chain technology, whereby the transactions are realized via various consensus mechanisms. Meanwhile there are many other crypto currencies besides the Bitcoin algorithm, which are based on other approaches. Official currencies are not the over 2,600 crypto currencies, however. Therefore, they are not accepted as official means of payment.

Paying with BTC and Co. – is that possible?

Many users have meanwhile become accustomed to the existence of Bitcoin and other crypto-currencies and no longer see them as skeptically as they did a few years ago. Nevertheless, they are not offered as a common means of payment in most stores and institutions. They are also not declared as official means of payment by the central banks. Nevertheless, it is possible – especially online in selected stores – to pay with Bitcoin. Let’s take up the question again: Crypto currency – what is that – but a “real” currency? No, BTC & Co. actually only exists in the form of a digital character string that symbolizes the coins. Nevertheless, users can purchase Bitcoin or earn it themselves and manage it in a wallet. In return, this value can be used as a means of payment at the desired store. How high this value actually is depends crucially on the current price development.

What is a crypto currency – how is its value defined?

If the users have for example in their Wallet 1 Bitcoin, then the value can be converted, as with the all time high on 17 December 2017, 18,360.44 euro amount to. If the exchange rate falls, however, as with the all-time low on July 5, 2013, the value of a Bitcoin can also be only 59.89 euros. By these course differences many investors shrink from it to invest in crypto currencies, because with the classical Fiat money there are not such enormous course fluctuations. In addition, the foreign exchange market is officially regulated, whereas this is not the case with the crypto market.

With crypto-currency Definition Wallet do not forget

What is crypto currency? In answering this question, we must not forget the crypto-wallet. This is necessary if the traders at crypto exchanges want to invest in Bitcoin and Co. A crypto-wallet is roughly comparable to a conventional physical wallet, although it functions exclusively on a digital level. There are different types of wallet:

  • Online Wallet
  • Offline Wallet

The Online Wallets are commonly referred to as hot storage and the Offline Wallets as cold storage. The differences lie in the administration itself, because the Online Wallets, as the name suggests, have a connection to the Internet. While this makes them easy to use for wallet owners, they also have an increased risk of hacker attacks. If the online interface is insufficiently secured, criminals could gain access and steal the coins. Past experience shows that such a scenario is no fairy tale. Especially in the early days of Bitcoin and Co. there were frequent attacks on wallets and block chain attacks, which led to the theft of coins that were irretrievably lost. The uncertainty of the public and investors increased enormously, and of course nobody wanted to lose their previously acquired coins through online attacks.

HOT STORAGE EXPLANATION

With hot storage, users can choose between the following wallet types:

  • Mobile Wallet
  • Desktop Wallet (GUI Wallet)

Added to this are the wallets, which can be accessed online via the browser. If the dealers decide to use a mobile or desktop wallet, a prior download of the software/application is required. Experience shows that these wallets are available free of charge and are easy to use. However, those who miss out on securing their wallet expose themselves to a higher risk. Wallet owners should not access their credit via a public network, as these networks are usually insufficiently secured. Also the security software should always be up-to-date to detect a possible virus attack on the PC or mobile device in time.

Tip: Many wallet providers now provide 2-factor authentication for additional protection. This still does not provide 100 percent security for hot storage, but the multi-factor authentication does provide significantly more security.

COLD STORAGE WITH WALLETS

Besides the online wallets/the hot storage there are the cold storage options. These include hardware and paper wallet. Only the Paper Wallet is free, for the Hardware Wallet the users must plan a unique investment expenditure. But there is the maximum protection with both storage possibilities, by the missing on-line connection hackers do not have access to the Coins at all. Such storage options are ideal for all those who want to securely manage large amounts of coins (for a longer period of time).

Wallet use: What owners should consider

We have already seen that there are different variants of the wallets. From practical experience we recommend cold storage, as the security level is simply the highest. Even if the wallet owners do not want to invest in the wallet, there is still the free Paper Wallet. In our opinion, it is still better than insecure online wallets for managing Bitcoin etc. However, wallet owners should not only ensure a high level of security, but also take care of their own key handling.

Public and private keys

Each wallet consists of a public and private key, the public and private address. The public key is equivalent to an account number; it indicates where the coins are transferred to after purchase. Therefore the public key is deposited at crypto exchanges or other marketplaces, but is anonymous. The private key, on the other hand, remains the exclusive property of the crypto wallet owners and is only intended for them. It is the PIN that enables access to the wallet. Anyone who possesses the private key could gain unhindered access to the wallet, steal the coins and transfer them somewhere else. Therefore it is important that wallet owners guard the private key like the apple of their eye.

What is a crypto currency & what about anonymity?

The question “crypto-currency what is it?” is also about anonymity, it is seen as a big advantage of Bitcoin and Co. But is it really the case in practice that transactions are completely anonymous? Bitcoin originally claimed to be the first anonymous crypto currency. However, if you look a little closer, you will see that this is not entirely true. Rather, Bitcoin is a pseudo-anonymous Internet currency, like many other crypto currencies.

BLOCKCHAIN REVEALS INFORMATION

In principle, no personal data is exchanged in crypto-transactions, as is the case with conventional bank transfers. This makes crypto currencies more anonymous than the classic money transfer. But the exchange of coins is not completely anonymous either, because a look into the block chain reveals some information. The block chain can be viewed by all users, which contributes to its transparency and counterfeit protection. The names of the actual transaction parties are not listed, however. Instead, for some crypto currencies there is only a record of the wallet address and the amount sent. However, the public wallet address does not allow any conclusions to be drawn about the users.

SOME CRYPTO CURRENCIES ARE ACTUALLY ANONYMOUS

In the far field of over 2.600 crypto currencies there are ever more Internet currencies, which offer a larger anonymity than for example Bitcoin. Since the demand for anonymous transactions increases and the users hope for more security from it, there will probably be in the future still more crypto currencies, which carry the predicate “anonymous”.

What is crypto currency? It all began with Bitcoin

Already in 1991 the first blockchain-like concept was developed by Stuart Haber and W. Scott Stornetta. But it was to take many more years until the Bitcoin white paper was published in 2008. Since Bitcoin is the first of all crypto currencies, we want to take a closer look at its history.

2008 – THE FIRST LIVE-BLOCKCHAIN AS IDEA

Prior to 2008, various technologists and scientists had already made initial attempts to implement a block-chain-like technology, albeit to the exclusion of the public. It was not until the Bitcoin White Paper 2008 that the first concept for a live blockchain was presented. This year, Satoshi Nakamoto published a paper entitled “A Peer-to-Peer Electronic Cash System”. This system solved the problem of double spending, which had caused previous blockchain attempts to fail.

2009 THE STARTING SIGNAL WAS GIVEN

In 2009, Satoshi Nakamoto realized Bitcoin with the help of programmer Hal Finney. The code was written and the first real block chain was created. At that time, nobody could believe what would be created based on this new introduction. Hal Finney was the recipient of the very first Bitcoin transaction when he received 10 Bitcoin from Nakamoto. Only a few years later, other block chain technologies and new crypto currencies developed from it.

FROM 2014 THERE WERE NEW BLOCKCHAIN INNOVATIONS

In the first years after its release, Bitcoin gained more and more attention and was used for individual projects (for example, donations). This also increased the number of transactions and the block chain grew enormously. This made transaction processing significantly slower, a disadvantage of Bitcoin. In addition, the users quickly realized that Bitcoin is not as anonymous as originally thought; after all, the transactions in the block chain could be traced. Because of these disadvantages, new block chain approaches were developed from 2014 onwards, which were based on Bitcoin but were to be significantly better in terms of functionality and technology.

BLOCKCHAIN 2.0: DECENTRALIZED APPS AND SMART CONTRACTS

In 2014 the term Blockchain 2.0 was first used in the well-known magazine “The Economist”. Blockchain 2.0 refers to the creation of applications that can be executed on a blockchain. This innovation represented a massive advance in blockchain technology. This concept made the prospect of using decentralized apps (apps whose code is distributed to a decentralized network of users and not stored by a central authority) on a block chain possible and smart contracts became plausible as well.

Ethereum first crypto currency with block chain 2.0

Already next year, 2015, the first blockchain 2.0 was presented. Vitalik Buterin, a contributor to the development of Bitcoin, saw potential for improvement over Bitcoin and wrote the code for Ethereum. Ethereum is intended to have the same functionality as Bitcoin, but also offers the possibility of running decentralized apps.

Conclusion: What is crypto currency? The new currencies are taking the market by storm

What is a crypto currency? This question cannot be answered briefly because the subject is extremely complex. However also technically less experienced users understand the potential behind Bitcoin and CO., finally crypto currencies are already represented since 2009 at the market and it become ever more. Until the introduction of Bitcoin in 2009, only the conventional fiat currencies were known, but these led to a banking crisis and uncertainty among investors. It was time for something new, for decentralized currencies with a completely different approach. The idea of block-chain technology was born and made available to the general public. But block-chain-like projects had not only existed since Bitcoin, but much earlier, although hardly anyone knew about them. With the advent of Bitcoin, a trend was created that produced many more crypto currencies. Meanwhile there are more than 2,600 Internet currencies, tendency rising. Although Bitcoin and Co. are not regarded as official means of payment, block chain technology is used in more and more industries and creates transparency, efficiency and cost reduction.

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