Cryptocurrencies: fake or real business?
- VFX Blog
- For beginners
Money is an important stage in the development of a person as a person and a social unit. The currency has gone a difficult way from the form of "exchange" to the means of "payments". Now the money has almost ceased to be real, plastic cards have almost replaced cash. Naturally, an extreme option should have appeared in the form of fully digital money. At first glance, everything is complicated, but we will try to tell make money with cryptocurrency using vfxAlert signals.
History and features
For most people, "digital money" is only associated with Bitcoin, but this is wrong. The first theoretical developments of what we now call cryptocurrencies appeared long before the first BTC. The "blind signature" technology, in which both parties to the transaction remain anonymous, and the storage of the transaction unchanged in the database (blockchain scheme) was first mentioned in the works of David Chaum, Adam Beck and Nick Szabo back in 1983-1997.
Transformation of theory into practice occurred in October 2008 after the appearance of the article "Bitcoin as a digital peer-to-peer cash" by a certain "Satoshi Nakamoto" on the Internet. He was the first to solve the main problems of anonymous currency: counterfeit coins and double-spending. Reuse of monetary units is not possible when using the blockchain, and each new coin must have a unique hash code. The author preferred to remain anonymous and delegated further development of the payment system to the non-profit organization Bitcoin Foundation. From the moment of publication to the present time, many attempts have been made to find out who "Nakamoto" is, but it did not work out.
What is cryptocurrency?
Those who want to learn in detail the technical features of the implementation of cryptocurrencies can search for detailed information on the network, and for beginners, it is enough to know the basic principles:
• Complete anonymity of financial transactions is observed. If you open a Bank account you have to provide more personal data and maintain their validity, to open a cryptocurrency wallet does not even need E-mail, simply install the app, add funds and immediately begin payments. The only problem with complete confidentiality is the inability to recall an erroneous payment.
• The payment system does not have a central settlement and emission centrer. Wallet (except online and mobile versions) works as a full-fledged node of the network and contains a full copy of the Blockchain from the first transaction. This approach ensures that the system is 100% healthy - failure of one or more nodes is not critical. Unlike "classic" payment systems such as SWIFT and Visa/MasterCard.
• Blockchain guarantees the integrity of financial information. It is not possible to change the data of completed transactions "retroactively", which eliminates double-spending. The node (wallet) stores the full (or most of) database, the information is open and viewable. According to Nakamoto, this should increase the security of the payment network, but this is a controversial issue.
Now knowing the basic principles, we can define what digital money is:
A cryptocurrency (digital cash/currency/money) – an anonymous means of payment for goods and services based on cryptographic algorithms, which does not have a cash equivalent. The issue of monetary units (issue) is not under the control of banking or government structures. Cryptocurrency banknotes can be exchanged for real (Fiat) money at the exchange rate agreed by the participants of the transaction.
Where does cryptocurrency come from?
After reading the previous paragraph, a natural question arises — if there is no global emission centre, then where do the new coins come from? Answer: using mining, resulting in new unique hash codes (blocks) to confirm payments. For each new code, a reward is paid in the corresponding digital coin, which can then be changed to real money and, thus, makes a profit.