Imagine a U.S. dollar and only needing to use the serial number on the dollar to engage in transactions. The cryptocurrency is kept secure because of the encryption process used during its creation. This encryption process converts information into a form that can only be read by the sender of the information and the intended receiver of the information, keeping it not only secure, but private. There is a limit to the number of cryptocoins that are produced, which is determined before the cryptocoins are created. The cryptocoins are traceable, verifiable, and entirely independent of the traditional financial institutions and banks. The very first cryptocoin, and the most successful and widely-traded cryptocoin to date, is the bitcoin.
In 2009, bitcoins were established as the first cryptocurrency by an individual using the assumed name of Satoshi Nakomoto. Bitcoins are produced through a process called “mining”. This process involves running a large computer program, or algorithm, on very powerful computers, which results in the circulation of the bitcoins and the verification of its transactions. The computer program that is used to create the bitcoin is referred to as an open source program. This is because it is open to others who can copy and use the programming code, as well as make modifications to it, in order to create their own cryptocoin.
Cryptocurrency has many advantages. The first advantage is that the cryptocoins and their transactions are secure. This occurs because of how the cyrptocoins are tracked and managed. They are traceable and documented in the blockchain or public ledger. A blockchain tracks a cryptocoin’s complete history, including all of the transactions it has been involved in. The blockchain is protected through cryptography, a process that keeps the blockchain and its data secure. This makes the possibility of fraudulent transactions near to nonexistent. It is not possible to steal someone else’s digital currency because the ledger reveals who the currency belongs to, and it is not possible to respend the same cryptocoins, because the ledger is continually updated to reveal the latest information related to every transaction and cryptocoin. Only a single ledger exists with copies distributed worldwide.Another advantage of cryptocurrency is that a central authority does not regulate, control, or manage the cryptocoin blockchain.
Instead, a large network of computers, which are referred to as nodes, stores the blockchain and its data. This network allows the nodes to communicate with one another and perform the necessary blockchain maintenance required whenever a transaction occurs. One chief advantage of using cryptocurrency is that transactions occur in near anonymity. The parties in a transaction use digital wallets to send and receive cryptocoins. A digital wallet is a software program or application that is accessed via a smart phone or computer. The only information that the parties in the transaction see is the identification number of the digital wallet used by each party. Because of this, performing transactions using cryptocoins keep one’s personal information secure and private. Businesses see advantages in using cryptocurrency, especially the lowering of fees for domestic and international purchases. When banks and financial institutions are not part of the purchase transaction, the fees associated with these financial institutions do not apply.
Bitcoin is the first coin to become a usable cryptocurrency. Bitcoins have several different symbols of reference, including XBT and BTC, as well as μBTC, representing a microbitcoin, and mBTC representing a millibitcoin. Since the creation of the bitcoin, more cryptocurrencies have come to the forefront of public attention and are presently available for use and/or investment. The remaining cryptocurrencies are not bitcoins, but altcoins or alternatives to the bitcoin. After the innovation of the bitcoin, in 2011, the Litecoin (LTC) and Namecoin (NMC) were released, with the Litecoin being the very first scrypt cryptocurrency. Creating coins utilizing a scrypt system is notable as the process involves utilizing more computer memory than traditional cryptocurrency creation. The year 2012 saw the creation of the Dogecoin (DOGE), which was the first cryptocurrency to use proof of stake and proof of work functions, which are variations of the original system used to create cryptocurrency.
In 2013, the list of available cryptocurrencies grew to include the Mastercoin (MSC), Primecoin (XPM), and Ripple (XRP). In 2014, Auroracoin (AUR), Blackcoin (BC), Coinye(KOI), Dash, MazaCoin (MZC), and the Monero (XMR) joined the ranks of existing cryptocurrencies. Additional cryptocurrencies that became available in 2014 include the PotCoin (Pot), PrimeCoin (XPM), and Titcoin (TIT).