A cryptocurrency is a medium of exchange designed around securely exchanging information which is a process made possible by certain principles of cryptography. The first cryptocurrency to begin trading was Bitcoin in 2009. Since then, numerous Cryptocurrencies have been created.
Fundamentally, Cryptocurrencies are specifications regarding the use of currency which seek to incorporate principles of cryptography to implement a distributed, decentralized and secure information economy.
When comparing cryptocurrencies to paper money, the most notable difference is in how no group or individual may accelerate, stunt or in any other way significantly abuse the production of money. Instead, only a certain amount of cryptocurrency is produced by the entire cryptocurrency system collectively, at a rate which is bounded by a value both prior defined and publicly known. In centralized economic systems such as the Federal Reserve System governments regulate the value of currency by simply printing units of paper money or demanding additions to digital banking ledgers. However, governments cannot produce units of cryptocurrency and as such, governments cannot provide backing for firms, banks or corporate entities which hold asset value measured in a decentralized cryptocurrency.
The first cryptocurrency, Bitcoin, was created in 2009 by pseudonymous developer Satoshi Nakamoto. It used SHA-256, a cryptographic hash function, as its proof-of-work scheme.In April 2011, Namecoin was created as an attempt at forming a decentralized DNS, which would make internet censorship very difficult. Soon after, in October 2011, Litecoin was released. It was the first cryptocurrency to use scrypt as its hash function instead of SHA-256. It also had a much faster transaction time compared to Bitcoin, making it more usable as a currency. Another notable cryptocurrency, Peercoin was the first to use a proof-of-work/proof-of-stake hybrid.Many other cryptocurrencies have been created though few have been successful, as they have brought little in the way of technical innovation.
Bitcoin is different: It wholly replaces state-backed currencies with a digital version that’s tougher to forge, cuts across international boundaries, can be stored on your hard drive instead of in a bank, and–perhaps most importantly to many of Bitcoin’s users–isn’t subject to the inflationary whim of whatever Federal Reserve chief decides to print more money.
As with shiny-metal-backed currencies, Bitcoins derive their value partly through their scarcity, which is defined not by how much can be dug up with shovels but by a cryptographic lottery. Anyone can get Bitcoins without paying cash for them by downloading and running Bitcoin’s “mining” program. The machines in Bitcoin’s mining network, now in the thousands, compute an encryption function called a “hash” on a set of random numbers, and coins are awarded every ten minutes to whichever miner happens to compute a number below a certain threshold.
That lottery tightly controls how many Bitcoins are created. There are currently close to 6 million in existence. By 2014 there will be about twice that number. Bitcoin’s distributed software is set to slow production over time so that there will never be more than 21 million in circulation. “No banker can control it. No evil dictator tyrant can print zillions and destroy the value,” says Bruce Wagner, organizer of New York’s Bitcoin developer’s meet-up.
Exchanges
What is an Exchange? An exchange is an institution, organization, or association which hosts a market where stocks, bonds, options and futures, and commodities are traded. Buyers and sellers come together to trade during specific hours on business days.
Exchanges impose rules and regulations on the firms and brokers that are involved with them. If a particular company is traded on an exchange, it is referred to as "listed". Companies that are not listed on a stock exchange are sold OTC (short for Over-The-Counter). Companies that have shares traded OTC are usually smaller and riskier because they do not meet the requirements to be listed on a stock exchange.
Fundamentally, Cryptocurrencies are specifications regarding the use of currency which seek to incorporate principles of cryptography to implement a distributed, decentralized and secure information economy.
When comparing cryptocurrencies to paper money, the most notable difference is in how no group or individual may accelerate, stunt or in any other way significantly abuse the production of money. Instead, only a certain amount of cryptocurrency is produced by the entire cryptocurrency system collectively, at a rate which is bounded by a value both prior defined and publicly known. In centralized economic systems such as the Federal Reserve System governments regulate the value of currency by simply printing units of paper money or demanding additions to digital banking ledgers. However, governments cannot produce units of cryptocurrency and as such, governments cannot provide backing for firms, banks or corporate entities which hold asset value measured in a decentralized cryptocurrency.
The first cryptocurrency, Bitcoin, was created in 2009 by pseudonymous developer Satoshi Nakamoto. It used SHA-256, a cryptographic hash function, as its proof-of-work scheme.In April 2011, Namecoin was created as an attempt at forming a decentralized DNS, which would make internet censorship very difficult. Soon after, in October 2011, Litecoin was released. It was the first cryptocurrency to use scrypt as its hash function instead of SHA-256. It also had a much faster transaction time compared to Bitcoin, making it more usable as a currency. Another notable cryptocurrency, Peercoin was the first to use a proof-of-work/proof-of-stake hybrid.Many other cryptocurrencies have been created though few have been successful, as they have brought little in the way of technical innovation.
Bitcoin is different: It wholly replaces state-backed currencies with a digital version that’s tougher to forge, cuts across international boundaries, can be stored on your hard drive instead of in a bank, and–perhaps most importantly to many of Bitcoin’s users–isn’t subject to the inflationary whim of whatever Federal Reserve chief decides to print more money.
As with shiny-metal-backed currencies, Bitcoins derive their value partly through their scarcity, which is defined not by how much can be dug up with shovels but by a cryptographic lottery. Anyone can get Bitcoins without paying cash for them by downloading and running Bitcoin’s “mining” program. The machines in Bitcoin’s mining network, now in the thousands, compute an encryption function called a “hash” on a set of random numbers, and coins are awarded every ten minutes to whichever miner happens to compute a number below a certain threshold.
That lottery tightly controls how many Bitcoins are created. There are currently close to 6 million in existence. By 2014 there will be about twice that number. Bitcoin’s distributed software is set to slow production over time so that there will never be more than 21 million in circulation. “No banker can control it. No evil dictator tyrant can print zillions and destroy the value,” says Bruce Wagner, organizer of New York’s Bitcoin developer’s meet-up.
Exchanges
What is an Exchange? An exchange is an institution, organization, or association which hosts a market where stocks, bonds, options and futures, and commodities are traded. Buyers and sellers come together to trade during specific hours on business days.
Exchanges impose rules and regulations on the firms and brokers that are involved with them. If a particular company is traded on an exchange, it is referred to as "listed". Companies that are not listed on a stock exchange are sold OTC (short for Over-The-Counter). Companies that have shares traded OTC are usually smaller and riskier because they do not meet the requirements to be listed on a stock exchange.