Digital Currencies or Crypto Currencies
In the digital world we are facing with the new inventions very soon because in the digital world the Idealization don’t need equipment or any other hardware’s.
You can perform your idea very fast in digital world.
The first and most successful digital currency is Bitcoin, Bitcoin was created in 2009 in fact Bitcoin inventor introduce new type of currency.
Bitcoin invented by Satoshi Nakamoto but nobody don’t know him! Satoshi Nakamoto is an alias name.
How Bitcoin work?
Bitcoin is peer-to-peer system. In fact when a sender send money to the receiver there is no inductor between sender and receiver in the other hand in the normal financial market when a sender wants to send 1 Dollar to the receiver the money will going through a bank or financial institution and Bank or Financial institution will get fee from sender or receiver in peer-to-peer system the money will go from sender to the receiver account directly without any dealer.
In peer-to-peer system the fee will pay to the miners and miners are not a specify person or company all bitcoin accounts holders can be a miner and receive fee.
How the money will transfer in Bitcoin?
All financials markets require security and the main and most important challenge is securing transactions. On crypto currencies the transaction will secure by blockchain technology.
What is Blockchain?
Blockchain technology is a next to next block that connected to each other by chains.
Each block contain information like account number account names and etc. These blocks are connected to each others by chains
The other thing is in block is hash, hash is a code on each block and it’s unique according to the block information for instance:
If the A’s block information change the Hash will change too then with chain technology if any block hash code change the others block should approve this change because the B’s block hash code include the A block hash code too, with the chains this change are connected to the other blocks in fact all blocks should approve this change.
Hash will calculate by mathematic rules and each changing on block will change the hash code then if every one change the block information the other blocks will reject this change because this block information did not match with the next and previous hash code in this technology security is very high and hack the system and change the information is supper hard.
Maybe you ask what will happen if a hacker change the block information and then write new information on the other blocks.
Because in blockchain technology date’s are not sort on one server and all information are copied on many different server the hacker should change all the system information and it is extra hard and maybe impossible.
Suppose that you are in a group with blockchain contract and this group have 10 users.
You will get a sheet of information from a user in blockchain system all other users should have a copy of this sheet and approve it then if you or a hacker change this sheet information the other 9 users can understand this is fake sheet and the system will reject new sheet because it is not match with their sheet.
Blockchain technology is one of the most innovative security idea in short, hashing means receive an input string of any length and giving out an output of a fixed length.
Bitcoin using SHA-256 (Secure Hashing Algorithm 256) system
On SHA-256 algorithm the hash information is fixed 256-bits length. This hashing system is a few different from the above example of hashing security.
Why Bitcoin using this algorithm?
The answer is simple if they use simple hashing algorithm the hash code becomes extra huge on each new block.
What is Bitcoin mining?
Now we understand how Bitcoin work and we found that Bitcoin is not sort on one server and the Bitcoin information are distribution on a lot of users systems.
When a block wants to change the difficult algorithm should be solve and approve by system then this change will need a lot of calculators. Well you know that in digital worlds CPU’s and GPU’s are calculator.
Then the new supper idea is that allow the bitcoin users to help this system to calculate the transaction they call it solve the block. The miners allow this system to use their CPU or GPU power for calculate the complex mathematical algorithm. For this help they will receive bitcoin as a reward or fee.
If the miners CPU has more power then he/she can help this system more and he can earn more rewards in fact the miners rent their system power to the Bitcoin system.
When Bitcoin started the bitcoin price was less than 0.05$ per bit and now you should pay more than 6000$ to get 1 bit!
In fact if you invested 100$ on 2009 on bitcoin now you had 12,000,000$!
Bitcoin shows new type of technology. Bitcoin is not under any company or government control and this is the most important advantage of bitcoin and this advantage smooth the successfully road for bitcoin.
Another amazing thing about bitcoin is that bitcoin is not without backing currency only 21 million bitcoins can mine by miners and this currency backing is their users and miners CPU powers!
Why we have only 21 million bitcoins and it can not be more?
Bitcoin calls: Digital Gold because the bitcoin is not unlimited just like the real gold!
Real gold will mine from the ground and bitcoin will mine from the digital worlds! And both of them are not unlimited.
When the miner share their CPU power in this network they try to solve complex algorithm to unlock the blocks and for each block miners have limited rewards
And at the moment the reward is 12.5 BTC.
The hard cap means the core of Bitcoin and it can not be changed, the Bitcoin creator Satoshi Nakamoto, created Bitcoin with a maximum supply of 21 millions.
Bitcoin mining rate is 25 Coins per 10 minutes and it will be half per 4 years till October 2140 all remained coin will mine. To extract each coin miners should solve 6 blocks algorithm it means that
6 blocks * 24 hours * 365 days * 4 = 210240 Bitcoin per year
The blocks solving reward will decrease every 4 years according to the bellow:
50 – 25 -12.5 etc.
When you calculate these numbers you will have maximum 100 rows it means that the maximum available Bitcoins will be 100*210240 = 21,024,000.
Bitcoin is not new now there are a lot of other digital or cryptocurrency at the moment and all of them get their idea from the Bitcoin and try to improve this idea and offer new innovation, may be you ask is it good to invest in cryptocurrencies or not?
My short answer is yes if you like risky markets.