Importance Of Cryptocurrency: Bitcoin

4. Cryptocurrencies: Bitcoin

A cryptocurrency is like any other currency, except it is under no central control. This means that as opposed to governed currencies, cryptocurrencies are created by private individuals and are fully decentralized. They function on a peer-to-peer basis, meaning that all transactions have to be confirmed by the Bitcoin-Network. In order to do so, transactions are publicly displayed in the network. This however is done anonymously by giving each user an address; an alias so to speak. The currency can only be successful if the people involved trust each other. But while with normal money only the central bank must be trusted, with decentralized cryptocurrencies anonymous users have to be trusted. For this reason, a type of public ledger lies at the core of the cryptocurrency: the blockchain. The blockchain records verified transactions and gives the

Although traditional transactions are completed in a matter of seconds, they also require various middlemen who complicate the process significantly, are not available to everyone, and even take a cut of the transaction.

Bitcoin transactions are much less complex. As shown in Figure 2, you simply send the Bitcoins directly to the desired recipient’s address, which is very much like sending an email to somebody. The Bitcoins are then registered to that address once the transaction has been verified by the network.

5. Blockchain

While it’s still questionable if Bitcoin will ever succeed and become a mainstream currency, its blockchain technology has already sparked huge interest and is being used outside the realm of Bitcoin. With the blockchain anything of value can be transferred and saved on a private basis. Its complex algorithms and simple transparency make it nearly impossible to cheat the system, and consequently ensure trust between strangers.

5.1. Transaction