What is Cryptography
The term Crypto is derived from the word encrypt which means encoding information in such a way that only authorised parties or personnels can access it digitally. And so it is safe to say crypto currency is an additional unit of currency that is designed to work as a medium of exchange digitally. it is a part of cryptography, think of it as a third party adversary in a transaction.
How it Works
In a system that uses cryptography there is a Key which is used in liking through users:The Symmetric-Key is one in which senders and receivers share the same key, this kind of encryption was only publicly known until June 1973.The public key is another one which one key is used for encryption and decryption.
Now the way Cryptocurrencies work is like this:
Unlike centralised banking, like the Federal Reserve System, where governments control the value of a currency like USD through the process of printing fiat money, government has no control over cryptocurrencies as they are fully decentralized .Money is being generated by members and then made to be a third party adversary whereby members involved use cryptography to secure the transaction. Most cryptocurrencies are designed to decrease in production over time
Bitcoin was introduced in 2009, since then hundreds of cryptocurrencies have been created referred to as Altcoins. With a system created by Santoshi Nakamoto Bitcoin will never have more than 21 million coins in circulation, the currency works on two protocols:
- Proof of work
- Proof of stake
Bitcoin is based on the proof of work system and uses a set of cryptographic hash functions SHA-256, which is designed by the U.S National Security Agency. The coin started gaining recognition in late 2013
In April 2011, Namecoin, the first alt coin, was created to form a decentralized DNS to make internet censorship more difficult. In October 2011, Litecoin was released and became the first successful cryptocurrency to use scrypt as its hash function rather than SHA-256. This gave the general public the ability to mine for Litecoins without the purchase of specific hardware such as the ASIC mechines used to mine Bitcoin.
Litecoin began receiving media attention in late 2013 – reaching a market cap of $1 billion. Ripplecoin, created in 2011, was built on the same protocol as Bitcoin but services as a payment system – think of it like a Paypal for cryptocurrencies that supports any fiat currency, cryptocurrency, commodity or even frequent flier miles.
Bitcoin is the largest cryptocurrency in the market in all areas such as market capitalization, volume, acceptance and notoriety, but it’s not the most valuable coin. NEMstake, while only having a market cap of $1,116,720, trades at $1,117 a coin. Looking at the market cap, Litecoin takes second place after Bitcoin with Ripplecoin close behind.
One coin that you are more than likely familiar with is Dogecoin which ranks, on average, thirds in trading volume, but has a relatively low market cap – ranking number six in the largest cryptocurrency.
The security of cryptocurrencies is two part. The first part comes from the difficulty in finding hash set intersections, a task done by miners. The second and more likely of the two cases is a 51% attack. In this scenario, a miner who has the mining power of more than 51% of the network, can take control of the global Blockchain ledger and generate an alternative Block–chain. Even at this point the attacker is limited to what he can do. The attacker could reverse his own transactions or block other transactions.
Cryptocurrencies are also less susceptible to seizure by law enforcement or having transaction holds placed on them from acquirers such as PayPal. All cryptocurrencies are pseudo-anonymous, and some coins have added features to create true anonymity.
Unlike a money transmitter Blockchain stands as a public ledger of all Bitcoin transactions that have ever been executed. The technology underpinning the digital currency Bitcoin, Blockchain has acquired a new identity in the enterprise. Today, more than 40 top financial institutions and a growing number of companies across industries are experimenting with distributed ledger technology as a trusted way to track the ownership of assets without the need for a central authority, which could speed up transactions and cut costs while lowering the chance of fraud. A person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location is referred to as a money transmitter