What is cryptocurrency in short?
today cryptocurrencies have become a global phenomenon is known by most people but understood by few in 2018 you'll have a hard time finding a major bank accounting firm software company or a government that hasn't researched crypto currencies or started a blockchain project beyond the noise in the press releases many people often fail to understand the basic concepts so let's walk through the whole story what are crypto currencies Satoshi invented Bitcoin in 2008 as a peer-to-peer electronic cash system to realize digital cash you need a payment network with accounts balances and transactions that are easy to understand one major problem every payment network has to solve is to prevent double spending that is to prevent one entity from spending the same amount twice usually, this is done by a central server who keeps records of all the balances in a decentralized network you don't have this server so you need every single the entity of the network to do this job every peer in the network needs to have a full list with all the transactions to check if future transactions are valid or an attempt to double spend but how can these entities keep it the consensus about these records, if the peers on the network disagree about one single minor balance everything breaks they need absolute consensus nobody knew how to achieve this until Sato proved it was possible cryptocurrencies are a key part of the solution to illustrate this we'll look at the transactions on the network the the transaction is a file that says Bob, gives X Bitcoin to Alice and assigned digitally by Bob once signed the the transaction is broadcasted to the the network sent from one peer to every other peers this is standard p2p technology nothing special happening here after a specific amount of time the transaction gets confirmed only miners can confirm transactions this is their job in a cryptocurrency network they take transactions stamp them as legitimate and spread them in the network after a the transaction is confirmed by a miner every node has to add it to its database it has to become part of the blockchain for this job the miners are rewarded with cryptocurrency for example bitcoins anybody can be a miner they just need to use some of their computers power to qualify for the task every miner competes to solve a cryptographic puzzle after finding a solution a miner can confirm the transaction and add it to the blockchain as an incentive to do this they then receive a payment from the network in the form of a cryptocurrency in this way a network of independent actors are economically incentivized to maintain the legitimacy of the transaction history so that's the gist of it cryptocurrencies are the key to the complex digital cash problem that Satoshi solved how to maintain integrity and consensus across independent and potentially malicious actors cryptocurrencies are essentially the monetary incentive offered to anyone willing to keep the network secure.