The reason I`m going to talk about that is that I need to create common language across the business and technology about this issue. Albert Einstein once said that "If u cannot explain it simply, you do not understand it well enough." My goal with this post is to explain it simply so everyone understands it well enough. Nowadays, cryptocurrency is a global phenomenon known by most people, but understood by few. In 2020, you'll have a hard time finding a major bank, accounting firm, a software company, or a government that hasn't researched cryptocurrencies 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 cryptocurrencies?
Satoshi Nakamoto invented bitcoin in 2008 as a peer-to-peer electronic cash system. To realize digital cash, u need a payment network with accounts 👨👧👦 , balances💲 , and transactions.
That`s easy to understand, right ❔
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 that keeps records of all the balances.
In a decentralized network, you don't have this server! So u need every single entity of the network to do this job.
Every peer(partner/computer🖥️)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 these entities keep it consensus about these records❓
If the peers of the network disagree about one single minor balance, everything breaks💥!
They need absolute consensus! Nobody knew how to achieve this until Satoshi 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 transaction
is a file📁 that says "Bob gives X Bitcoin to Alice" and assigned digitally by Bob. Once signed the transaction is broadcasted to the network, sent from one peer to every other peer. This is standard p2p(peer to peer) technology, nothing special happening here😎. After a specific amount of time(almost instant)the transaction gets confirmed.
Only miners🖥️🖥️ 🖥️ can confirm transactions!
This is miner job💼 in a cryptocurrency network, they take transactions, stamp them as legitimate, and spread them in the network! After a 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 have rewarded🏆 with cryptocurrency for example bitcoins. In our blockchain example is HIVE. Anybody can be a miner. They just need to use some of the computer's 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 receive a payment from the network in the form of a cryptocurrency. In this way, a network of independent actors is economically incentivized to maintain the legitimacy of the transaction history. So that's the gist of it. Cryptocurrency is 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.
Finally, let me mention that I am involved in the project of a close friend of mine, which you can see below
iliyan90 in 3speak
Project name: "I'm here to stay #bgn"
Project info:
English
Bulgarian
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