Cryptocurrency: what is it in simple words

In this article, we will analyze in detail: what is a cryptocurrency, where did it come from and how to start mining it?

Hello, dear readers of the Money Hunters blog. The emergence of digital money excited the world, but still remains a mystery. What are virtual coins, how is their circulation carried out, where to start cryptocurrency mining and does it have a future? Cryptocurrency what is it in simple words about the complex?

The subtleties and nuances of financial programming are available only to professionals, however, a simple layman has long managed to acquire his own electronic wallets, learned to shop on the Internet, paying remotely through a whole arsenal of services. Now it's time to get acquainted with the new instrument!

Where did the cryptocurrency come from?

The virtual analogue of paper money saw the light relatively recently - in 2009, instantly capturing the attention of advanced regulars on the Web. It was they who became the pioneers and the main earners of virtual wealth.

Thoughts about the birth of an independent digital currency began to hover in the imagination of IT geniuses back in the 90s. The founding fathers of cryptocurrencies were:

• Timothy May is a former Intel employee and an initiator of progress.
• Whitfield Diffie is the author of public key cryptography.
• Philipp Zimmermann is a specialist in PGP email encryption.

Initially, the purpose of the trinity was to discuss the prospects for the development of Internet technologies. In the course of the dispute, a proposal arose to create a special currency, absolutely anonymous, independent of states and corporations, capable of overturning the idea of ​​​​humanity about financial institutions.

On the way to bitcoin

May's idea was embodied in the concept of Jim Bell, who also left his career at Intel and took up the arrangement of the project: "Political Hitman Exchange". His revolutionary theory was based on the right of citizens to accumulate funds anonymously and use them as a weapon against negligent politicians. It was proposed to eliminate the "people's representatives" by hiring a performer if there was a sufficient amount in the "public pocket". Bell never managed to realize his plan, because law enforcement agencies immediately became interested in the extremist.

Otherwise, the separation of cryptocurrencies took place quite measuredly. In 1998, a former student at the University of Washington, Wei Dai, published a thesis on B-money, a financial system with free online access, free from taxation and other legislative measures. This progress has remained at the abstract stage. Then there was the programmer Nick Szabo, who was engaged in the creation of Bit Gold - not so much an anonymous, but an intelligent system designed to earn money by solving the most complex cryptographic equations by participants in an analogue of a financial pyramid. The system turned out to be untenable, since its author did not provide answers to current questions.

A progressive idea would have been in the air until Satoshi Nakamoto entered the arena in 2008. His solution was based on the construction of information chains - transaction data repositories. So, the first bit-coins (English bitcoin) appeared. Unsecured, but claiming to be a universal means of payment. After two years of participation in the project, the mysterious inventor disappeared, and in 2011 all traces of his presence in the virtual world were erased. There is an opinion that the founder of Bitcoin owns the lion's share of the digital capital of the planet - 1 million bitcoins. This amount is almost equivalent to $500 million.

Cryptocurrency what is it in simple words?

The term includes two components: the Greek adjective "crypto", meaning "encrypted", "secret" and a common speech variant of the definition of monetary units - "currency". The essence of a cryptocurrency is a code that emerges through complex calculations. Powerful computer hardware is used to uncover the secrets of data chains. The one who solves the "key" receives a cash prize - a digital coin - a coin.

The decryption process is controlled by developers. It is they who generate tasks for an audience called virtual wealth miners or “miners”. The faster the number of participants in the process grows, the more complex the proposed calculations become. The system does not have a sole owner, as well as an administrator familiar to other services.

Virtual coins from "a" to "z"

Having clarified the essence of the concept, it is not difficult to determine the definitions and give an interpretation to all the components of a revolutionary financial instrument. The answer to the question: “Cryptocurrency, what is it in simple words?” will sound like this:

“This is a digital monetary standard that operates with coins (translated from English, coin is a coin), protected from forgery and copying by encryption.”

What is the difference between crypto-coins and ordinary money, because now they have also become regulars in online payments?

Before getting into the owner's electronic wallet, paper funds are deposited to a bank account or transferred from a purse to a terminal in their physical form. Even before that, they are issued by government agencies and put into circulation under the strict supervision of governments. Cryptocurrency appears directly on the Internet and is not "tied" to existing financial institutions.

How to get coin?

The production of crypto-currencies or mining (from the English mining - mining) is a process available to every Internet user with specialized computer equipment of suitable power and appropriate software.

Coin mining consists of solving algorithms, the complexity of which grows in proportion to the number of people willing to participate in mining. Solving the problem brings a reward in the form of a digital coin. Evidence of the existence of "earnings" falls into the block chains (eng. block chain). It turns out an analogue of the account. Virtual financial reserves are stored in a decentralized way by distributing them among the wallets of all system participants.

How to start cryptocurrency mining?

The easiest way is to imagine the scheme for mining digital coins in the form of a step-by-step algorithm:

1. Choose a cryptocurrency: Bitcoin, Ethereum, Litecoin, etc.
2. Decide on a fork (English fork - fork, fork): the code base of the software project used. Criteria: features of the encryption algorithm, profitability, liquidity of funds.
3. Pick up a pool (server that distributes the percentage of production), register, create logins and passwords for workers - computers participating in mining.
4. Install and configure a miner for the pool (English miner - miner) - specialized software.
5. Download from the fork offsite and install the wallet.
6. Create a unique address and enter data on the tab: "Account - Payouts of your pool".
7. Launch mining.

Professionals advise to anticipate activities related to the mining of cryptocurrencies, accurate calculations of the costs of equipment and software, and cryptographic currency calculators available online help in this.

Benefits of virtual money

During its existence, the digital currency has experienced a lot of attacks and persecution, including the derogatory nickname "money surrogate", but the advantages of innovation are obvious and most representatives of progressive thought believe that such significant advantages should not be written off:

• democracy: the opportunity to improve the financial situation for everyone;
• simplicity and accessibility: work in the system is not difficult and practically cancels the collection of all kinds of commissions;
• anonymity: exclusion from use of information about the owner of the wallet from which the transaction is carried out;
• freedom and equality: the absence of a single center for the distribution of funds and control over their turnover;
• high level of security: information cannot be copied and stolen;
• the presence of protection against inflation: the complexity of the process ensures the appearance of limited quantities of coins.

What is the danger of cryptocurrencies?

Despite criticism and rejection at the state level, a record increase in the cost of bitcoin continues, however, it is worth considering those factors that do not play in favor of cryptocurrencies:

• decentralization excludes guarantees for the safety of funds;
• the specifics of extraction and use generate high volatility;
• the lack of a legislative framework provokes prohibitions from the regulators of some states;
• the slightest leak of information: the loss of a password or a malfunction of the wallet deprives the owner of all available coins;
• there is a clear trend towards a decrease in the profitability of mining due to the complication of the mining process.

What does the world community think about digital money?

The rapid evolution of cryptocurrencies and the formation of their own niche in the market are due to considerable public interest. It is this factor that has led some world leaders to end the boycott, suspend the bans and look at the new financial phenomenon in all seriousness. The world is divided into three camps:

• Countries that adopt cryptocurrencies are promoting the creation of payment systems and investing in the development of platforms.
• Governments that have become ardent opponents of the very existence of the virtual equivalent of money and have consolidated their rejection at the legislative level.
• States that found themselves at a crossroads and took a neutral wait-and-see position.

The progressive point of view regarding digital money belongs to Israel. Here, virtual currency has become a commodity for which a tax is paid. There is also a legislative platform for mining. In the United States, innovation is welcomed, but the lack of a unified legal framework is causing local courts to issue conflicting verdicts, either justifying or stigmatizing bitcoin as an unrecognized means of payment. The Japanese government is set to legalize cryptocurrency. Corresponding changes have already been made to articles, charters and codes, which determines the status of a legal payment instrument.

Venezuela, Bangladesh (the prison term for use and extraction is 10 years), Vietnam, Thailand, Bolivia and Iceland are categorically against "money surrogates". In India, there are no strict bans, but show trials are held against miners.

Virtual money is not prohibited in Switzerland and "circulates" as a foreign currency. Bulgaria allowed the recognition of bitcoin transactions for the purpose of obtaining tax profits. China has a special position. At first, coins were used privately in the Celestial Empire, but then the "freeze" of exchanges began due to the depreciation of the yuan.

Adventures of bit coins in Russia

The Central Bank of the Russian Federation managed to demonstrate a real “fountain of passions”: from a complete ban on the production and circulation of cryptocurrencies with the threat of falling into the dock or paying large fines to probable legalization. At the moment, positive trends prevail.

Recently, users learned about the organization in the country of structures that will deal with the settlement of the issue. For this purpose, a commission was created, whose task is to consider blockchain projects and the possibilities of their implementation in domestic payment formations. It remains to decide on the status that the cryptocurrency will take. That it is already known in simple words in Russia, startups have found their devotees, only determination is not enough.

The procession of cryptocurrencies around the planet continues. More and more people see priorities in their use and implement their ambitious plans. The cost of coins is breaking records on exchanges, production is growing and new varieties of coins are appearing, more and more new players are joining mining. It will no longer be possible to ignore these processes, and only time will tell what awaits virtual money in the future.

For today we have everything. Now you know where the cryptocurrency came from and how to start mining it.

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Best Regards, Money Hunters