Modern methods of communication and human interaction have brought several interesting and exciting additions into our lives. One such phenomenon is called cryptocurrency, and what this term presents is virtual money that can be used for various purposes. These currencies are a relatively new method, and most of them appeared in the last decade. For instance, the most popular cryptocurrency is Bitcoin, and this currency system was developed in 2008 and 2009, which means that this virtual money is still young and therefore unfamiliar to the general public. Yes, you’ve all heard about Bitcoin, but do you fully understand what it is and how it works?
The General Idea Behind Bitcoins
Satoshi Nakamoto created this method in 2008, and over the years – millions of transactions have been performed with this virtual currency. In its essence, Bitcoin is a digital currency that earns its value through consensus of the involved parties, and government or any similar organization have no effect on the value of Bitcoins. Since it is independent and entirely decentralized, this cryptocurrency can offer various advantages, including lack of fees for transactions and total anonymity of its users.
Keeping Track Of The Transactions
We all know how important it can be to keep things organized and categorized, and the same applies to financial world as well. Bitcoin transactions need to be indexed in the proper way since this prevents fraud and double spending. For example, if someone pays for something with Bitcoins, it is vital to record that transaction and index it so that the other computers in the system are fully aware of this transfer. Bitcoin works on a typical Peer-To-Peer system, which means that no central governing unit has authority over the rest.
Without adequate listing and categorization, Bitcoin system would quickly collapse, and the original idea of Nakamoto was to create a closed system that operates in a perfect manner. So far, it seems that everything is going fine since the value of Bitcoins are steadily growing, but occasional drops in price are showing that cryptocurrencies are still not sufficiently stable and reliable, and we will see what the future brings for this interesting system.