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What are cryptocurrencies? How does work cryptography and blockchain ?

  Cryptocurrency is a digital form of money or currency that can be sent, exchanged and transferred without going through a bank or central system, through a network known as a blockchain. This means that crypto is decentralized, meaning that it doesn't have a central controlling entity that governs it. 


But what are blockchains? Essentially, they're a list or a database. Transactions of cryptocurrencies are stored on this list. These transactions are stored in chronological groups known as blocks, hence the name blockchain. Blockchains are also decentralized, meaning that they are managed by a plethora of computers across the world, and the code is all open source, meaning publicly accessible.


 But how does this make it secure? Well, since so many computers have access to the same information, it can be quickly and easily verified that the information is accurate by checking with the other copies. In simple terms, blockchains can also only be added to, so there's no going back deleting transactions from the past. Giving everyone a secure Ledger of all transactions of a given cryptocurrency or set of cryptocurrency. 


But why is it called cryptocurrency? Well, the blocks stored on the blockchain are all secured by cryptography, hence the crypto in the name. This is essentially complicated computer speak for math puzzles. Transactions are signed and verified by miners solving complex math problems to verify the blockchain, the Ledger of transactions. 


But what are miners? Miners are essentially just computers solving problems. Computers contribute to the blockchain by doing this work and in return get a reward. Miners typically focus on a specific cryptocurrency, say Bitcoin, doing work for the Bitcoin blockchain. 


These computers, and by proxy the people that run them, get paid in Bitcoin rewards when they solve problems. It's this system that keeps cryptocurrency working. Cryptocurrencies get their price from their utility, scarcity, or interest, in the case of Bitcoin, the largest and oldest crypto. The Max number of bitcoins that can ever be made is 21 million. Not only this, but as new bitcoins get mined, the blocks on the blockchains mined by miners and rewarded in new Bitcoin, the amount of Bitcoin rewarded for each block decreases overtime. So unlike the US dollar, which has an infinite supply, theoretically as more and more people transact in Bitcoin, the value goes up and up because there's a finite, limited supply. On the other hand, cryptos can get value from their utility or market interest.


 Doge coin is a great example of this. We saw massive gains in Dogecoin, originally created as a meme purely because there was a lot of market interest. When the interest outpaces the growth of supply, we see the price go up via supply and demand. Crypto is just digital money where transactions are stored on digital lists, protected by cryptography, and stored on a network of computers, the blockchain.


 

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