Bitcoin is on everyone’s lips and you don’t know what it is all about? This article will explain the basics Cryptocurrency For Beginners.
WHAT IS CRYPTOCURRENCY FOR BEGINNERS ?
“Cryptocurrency” is a digital currency that uses cryptography to create new currency units and to secure and manage all transactions.
Cryptocurrency has been created and managed by computer software and does not physically exist in any way. In other words, it is a currency that is used within the software and created by software as opposed to a specific physical currency.
Unlike cryptocurrencies, for example, the US dollar, made by the US government and used in the US as an official medium of exchange, functions. Its creation and operation is regulated under a US license in accordance with the laws of that country.
The US dollar is “fiat money” and, like most national currencies, it is backed by a national government and a national bank. In contrast, Bitcoin, currently the most powerful and important cryptocurrency , is manufactured and used in the programming chain and completely regulated and managed by Bitcoin’s “Blockchain” computer technology.
Besides, there is not a particularly big difference between a fiat currency and a cryptocurrency: just as money currencies can in many cases be used as currencies outside the country of origin, so can Bitcoin be exchanged in transactions completely unrelated to the Bitcoin technology.
HOW DOES BITCOIN WORK?
Imagine a small village in the mountains where money is not used. Ania likes Basia’s watch, and Basia chose Ania’s bracelet. Both ladies have reached an agreement and want to exchange accessories. Before this happens, however, all the residents of the community gather in one place to check. Whether Basia is the owner of the watch and Ania is the owner of the bracelet. The village is not an ideal place. While people respect each other, they have chosen not to give each other a credit of trust.
Finally, the assembly decides that the ladies can exchange things and everyone remembers that now Basia has a bracelet and Ania has a watch. This is how the bitcoin network works.
Let’s assume that Ania has the bitcoin that Basia wants to send. So she broadcasts what she wants to do across the web using an application (desktop or mobile). Other bitcoin users’ apps check that Ania’s account actually has bitcoin. If the verification is positive, Ania can send bitcoin.
WHAT IS BLOCKCHAIN ?
Here I can explain some examples for Cryptocurrency For Beginners. I wrote that everyone in the village is checking who the bracelet and watch belong to, but how does this happen? After all, memory can be fleeting.
Well, everyone in the village has their own books where they write down what belongs to whom, who gave what to whom and for what. Thanks to this, they can check at any time who was the owner of the watch in front of Ania or the bracelet in front of Basia. Unfortunately, this solution has a certain disadvantage. In return for collecting the history of all exchanges in one place, you have to pay with large dimensions of the book.
This is what blockchain or blockchain is about. It stores all transactions from the very beginning of bitcoin’s existence. We can check what the first anonymous person did with his bitcoins ( we don’t know his real identity yet ) or who has the most bitcoins (which address). But why is this book called blockchain?
WHAT IS A BITCOIN BLOCK : A BRIEF NOTE IN CRYPTOCURRENCY FOR BEGINNERS
Gathering all members of the community in one place to confirm one exchange is an excess of form over content. Therefore, the village decided that exchanges could be made once a week. Then everyone will gather in the market and check the correctness of transactions from the last 7 days.
Fortunately, exchanges in bitcoin are not limited in time, because the system works 24/7. During this time, however, transactions are properly organized – divided into blocks. You can think of them as single pages of the book. However, the card capacity is limited – we have a fixed font size, font and card sizes, so you can save this number of transactions on it, and not another number.
So when the card reaches its capacity, it is closed and then the transaction is validated. If everything is correct, the card is pasted into the book, i.e. the block becomes part of the… block chain. Each bitcoin block has a capacity of approx. 1 MB and can contain approx. 2 thousand. the transaction. This is relatively little and therefore the network is often overloaded .