Understanding Cryptocurrency
The concept of a digital currency secured by cryptography has existed since at least 1983, when American cryptographer David Chaum introduced ecash.
David Chaum
However, Bitcoin (BTC) truly gained mainstream recognition when it launched in January 2009.
Bitcoin’s Innovation
Bitcoin’s groundbreaking innovation was implementing blockchain technology—a distributed, cryptographically secured ledger that records all BTC transactions.
By utilizing the blockchain, the Bitcoin network operates without needing a central authority, such as a bank, to enforce rules.
The network consists of numerous independent nodes that voluntarily participate in the system.
Understanding Cryptocurrency | Source: Investopedia
Securing Bitcoin’s Blockchain Through Computation
The maintenance and updating of Bitcoin’s blockchain rely on a consensus algorithm called proof-of-work.
Based on cryptographic hash functions, this computationally intensive algorithm ensures that creating new Bitcoins requires significant effort and that all BTC transactions are faithfully and permanently recorded.
The Ripple Effect
The emergence of Bitcoin sparked the growth of the cryptocurrency industry, which, by 2020, comprised tens of thousands of cryptocurrencies with various characteristics, collectively valued in the hundreds of billions of dollars.
Exploring Cryptocurrency Landscape and Varied Algorithms
Some cryptocurrencies, like Bitcoin Cash (BCH), Litecoin (LTC), and Monero (XMR), operate similarly to Bitcoin as fully decentralized proof-of-work coins.
Others employ different consensus algorithms, such as Tron (TRX), Tezos (XTZ), and Dash (DASH), which utilize proof-of-stake.
Some cryptocurrencies are based on private blockchains used for internal company operations, inaccessible to the general public. However, all cryptocurrencies share a common feature—cryptographic algorithms secure their networks.