What is Cryptocurrency?
Cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currency.
Cryptocurrency is not subject to any specific regulatory entities for verification, regulation and transfer of value across the network.
Therefore, transfers of value with financial transactions between two parties happen directly with no centralized authority involved.
Fiat Money Vs. Cryptocurrency
| Fiat Money | Cryptocurrency |
|---|---|
| Physical medium of exchange | Digital medium of exchange |
| Represented by notes and coins | Represented by 1 private and 1 public pieces of code |
| Unlimited Supply | Limited Supply |
| Issued by a government | Produced by computers |
| Centralized. Issued and controlled by law and banks | Decentralized. Not controlled by any government or entity. |
| Value determined by the market and regulation. | Value determined by supply and demand. |
Bitcoin
Bitcoin was the first cryptocurrency employing Blockchain technology. It has no physical form and intrinsic.
- Cryptocurrency and an electronic payment system
- Invented by Satoshi Nakamoto in 2008
- First decentralised payment network
- Peer-to-peer system (without third-party)
- Public Blockchain
• https://www.blockchain.com/explorer?view=btc
• https://txstreet.com/v/eth-bch
• https://txstreet.com/v/eth-bch
Transactions Workflow
Current (traditional) transaction:
- Ahmad in Jordan wants to send $10 to Yazan in Australia.
- Ahmad will execute the transaction through his banking system.
- Since his bank is acting as a trusted third-party, it will cut around 5% transaction fees, also the transaction will take 3-5 business days to reach Yazan.
- Which is resulting a high cost of fees and time.
Bitcoin transaction:
This process provide a faster, and nearly free of fees transaction.
THE BITCOIN TRANSACTION PROCESS
Nick's quest to sent 0.5 BTC to his friend Rose
Nick's quest to sent 0.5 BTC to his friend Rose
Nick opens his Bitcoin wallet
scans/copy Rose's address
fills the amount and the fee
and sends
wallet signs transaction using Nick's private key
transaction is propagated and validated by the network nodes
miners include the transaction in the next block to be mined
miner who solves the Proof of Work propagated the new block to the network
the nodes verify the result and propagate the block
Rose sees the first confirmation
new confirmations appear with each new block that is created