By:| 2 min read | 16/07/2019
So you understand what Cryptocurrencies are and you’ve even dabbled a little bit. Look at you, great work! You now want to learn a bit more of the ins and outs of Cryptocurrencies. Let’s take a closer look into the history and how transactions work.
WHERE DID CRYPTOCURRENCIES COME FROM?
Well to be fair, Bitcoin was the first working, decentralized, cryptocurrency. Satoshi Nakamoto published the original white paper on Bitcoin in October of 2008 and had the code operational by January of 2009. There were a few failed attempts back in the 80’s & 90’s but they all relied on the “Trusted Third Party” approach.
This is what Bitcoin wanted to avoid. In short, we have cryptocurrencies and blockchain technology today explicitly because the financial system failed us enough for an engineer to design an alternative system that didn’t require banks. Without Bitcoin, we would not have both blockchain technology and a rapid flourishing of various cryptocurrencies.
HOW DO THEY WORK?
You already know essentially how they work, via the blockchain, on an open public ledger operated on a peer to peer network. Let’s dig a bit deeper here and break things down even further.
After the initial transaction is sent from one user to another, the final step is the confirmation. This confirmation is essential and what really makes the blockchain unique. The way these transactions are confirmed is what sets it apart from the Trusted Third Party approach of traditional markets. Once the transaction is confirmed, it’s set in stone and irreversible. These confirmations can only be made by certain members of the blockchain network called miners. Once a miner confirms the transaction, it’s added to every part of the network and is now a permanent part of the blockchain.
HOW IS A TRANSACTION CONFIRMED?
To confirm a transaction the miner basically has to solve a puzzle (this is where the Crypto comes in) Once the miner solves this cryptologic puzzle the transaction can then be added to the blockchain. For confirming the transaction the miner is given a reward, a small amount of the cryptocurrency.