What Are Cryptocurrencies? - A Brief and Concise Summary for Beginners

Hi hivers. We know coming into the crypto ecosystem can be quite confusing for many. Hence, this article aims to simplify the concept of what cryptocurrencies mean for newbies who are just venturing into the crypto space.

Let's get to business then. Shall we?

Bitcoin was made in 2008 by a pseudonym "Satoshi". It serves as a pair-to-pair electronic cash system. In a bid to make digital cash a possibility, the basic things needed include; a payment network system with accounts, balances and transactions.

However, for the payment network to survive and thrive, there is a need to prevent double spending by users of the payment network. i.e One person can not be allowed to spend the same entity twice.

In the world we live in, there is a need for central servers to keep track of transactions and prevent the act of double spending. But when it comes to a decentralized network system, these servers do not exist. Rather, every device connected to the network system is needed to monitor these transactions.

In other words, every pair of devices in a decentralized network needs to have a full list of every transaction to ascertain if future transactions are valid or nullified as double spending.

So how exactly does this prevent double spending, one might ask?

This is where the amazing power of decentralization comes into play. If the pairs on the network happen to disagree on a tiny bitsy minor balance, the transaction breaks!

This was thought impossible until Satoshi actually found a way to make it possible. And for a transaction to take place, a number of activities happen behind the scenes.

Let's say;

A transaction states "@instantchange sends 1 HIVE to @gotgame" and is signed and approved by @instantchange.

A broadcast of this transaction happens as it is sent from one pair to another using standard P2P technology.

After some specific amount of time (usually dependent on the volume of cash being transacted), the transaction gets confirmed.

However, only miners can confirm such transactions by stamping transactions and spreading them all over the network.

Soon as the miner is done, every node on the network adds that transaction to their database and it gets stored permanently on the blockchain.

And what exactly does it mean to be a Miner?

As stated above, they are basically there to confirm transactions. And for their efforts, they are rewarded with cryptocurrencies.

An awesome thing to know is that anybody can be a miner! A computer in good shape is all that is needed most times. All miners compute in a bid to solve cryptographic puzzles. After solving the puzzle, the miner can confirm the transaction, add it to the blockchain and get rewarded by the network.

These economic incentives the miners receive, help to establish and maintain the legitimacy of the transaction history.

So to sum it all up,

Satoshi solved the complex digital cash mystery problem and Cryptocurrencies serve as the key to help provide integrity and consensus across independent and potential malicious acts.

Cryptocurrencies can simply be seen as incentives gained by anyone who participates in keeping the network secure!!.

This basically explains what cryptocurrencies are and it can be applied for every crypto you know that exists.

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