Close Menu
Invest Intellect
    Facebook X (Twitter) Instagram
    Invest Intellect
    Facebook X (Twitter) Instagram Pinterest
    • Home
    • Commodities
    • Cryptocurrency
    • Fintech
    • Investments
    • Precious Metal
    • Property
    • Stock Market
    Invest Intellect
    Home»Cryptocurrency»What Is Cryptocurrency? – “The Defiant”
    Cryptocurrency

    What Is Cryptocurrency? – “The Defiant”

    August 19, 20246 Mins Read


    The 21st century arguably changed course with the advent of blockchain technology. One of its key features, of course, is cryptocurrency, the digital money powered by blockchain’s peer-to-peer (P2P) mechanics.

    Thirteen years after the introduction of Bitcoin, these digital assets reached a turning point in 2021 in terms of adoption. According to a survey by Gemini, 41% of new crypto owners bought their first coins in 2021.

    Crypto-curious — people who don’t own cryptocurrency, but are interested, continue to rise, at 41% globally. Source: Gemini 2022 State of Crypto Report

    Will we see a future in which cryptocurrency replaces fiat money? To find unpack that question let’s discuss money.

    What Is Currency?

    Modern currencies managed by central banks government officials. This is why money is called fiat (decree) currency. The central bank operates by decree from the state, and in tandem with policymakers, central bankers help set the value of money by using interest rates and regulating the printing of currency by national mints.

    In times of crisis such as the 2008 subprime mortgage crash or the Covid-19 pandemic in 2020, central banks may take emergency actions to support economic stability.

    In the second and third quarters of 2020, for example, the Federal Reserve increased its balance sheet by $4.5T to mitigate the economic contraction after the U.S. went into a series of lockdowns to stop the spread of Covid. (Lawmakers also flooded the economy with cash by distributing stimulus payments directly to companies and households, a policy that directly led to the boom in cryptocurrency valuations through 2021).

    From one financial crisis to the next, the Fed skyrockets its total balance sheet, making it difficult to discern true value. Source: Board of Governors of the Federal Reserve System (US)

    There are consequences to creating more money, though. The Fed made each banknote less valuable. This triggered the worst bout of consumer price inflation in 40 years and prompted the Fed to raise interest rates. As a result, investors shifted en masse from risk assets such as equities and cryptocurrencies into cash.

    Previous Digital Money Attempts

    Satoshi Nakamoto, the mysterious creator of Bitcoin, designed his invention to circumvent the central bank system by using the internet. Yet there were earlier attempts to create digital currencies. In 1990, DigiCash issued electronic money called eCash. It used cryptography to encrypt sending and receiving data, which allowed for private transactions.

    Still, as a company DigiCash was centralized. In 1998, it went bankrupt, and eCash perished with it.

    What Is TVL?

    What Is TVL?

    A Step-by-Step Guide to a Key Metric in DeFi

    Another attempt was made in 1996 by Dr. Douglas Jackson and Barry Downey. They created e-gold, in which electronic money is pegged to the precious metal. Instead of trading physical gold, users could trade a synthetic version of gold online. These two attempts failed because they weren’t decentralized.

    In 1998, computer scientist Nick Szabo developed the concept of cryptocurrency as we know it. His take was called Bit Gold and it used mining, cryptography, a public ledger, and a peer-to-peer network. Some argue this paved the way for the first true cryptocurrency — Bitcoin.

    Cryptocurrency Explained

    The “crypto” part in cryptocurrency means that all transactions are encrypted. While this entails financial privacy, it exists as long as one’s wallet address is not linked to a real identity.

    A digital wallet manages encryption, and is unlocked with a private key. As a result, digital wallets are called non-custodial, in contrast to custodial wallets which are cryptocurrency exchange accounts at Binance or Coinbase.

    Digital wallets unlock access to a blockchain network. For example, a user called Stefan Thomas lost access to 7,002 Bitcoins he bought early on, losing hundreds of millions of dollars.

    That’s because he no longer has the key to access the blockchain network or more precisely, to unlock the part of the ledger that recorded his transaction.

    How Do Cryptocurrencies Work

    In technical terms, cryptocurrency is a software program and part of a digital network. The cryptocurrency architecture consists of:

    • Source code: It sets the cryptocurrency’s total coin supply and the schedule with which new coins are released.
    • Mining or validation: Whether it is Proof of Work (mining) or Proof of Stake (validation), these consensus algorithms ensure there is no double-spending. The latter is the difficulty with which someone can duplicate crypto coins or spend them at more than one instance.

    A blockchain network consists of nodes — the computers that maintain it. Each blockchain full node keeps a copy of the entire transaction ledger, which is continually updated by miners/validators.

    Solving the double-spending problem is the key that unlocks cryptocurrency value. For example, if you spend $5 on an ice cream, you cannot revert that transaction without physically sneaking in and stealing the banknote back. With digital currencies, we are dealing with intangible code.

    A blockchain network such as Bitcoin uses miners to verify each transaction and add thousands of them to the ledger as a new data block.

    Source: Bitfeed

    Each data block is time-stamped and forms a continuous chronological chain. In other words, if someone were to tamper with it, they would have to branch off a new blockchain with the fraudulent transaction as the Genesis block — the starting point of a new ledger. This is why the Bitcoin blockchain is immutable.

    Without this immutability provided by miners, as they exert their cryptographic hash power, cryptocurrency could be easily subverted and rendered worthless.

    Moreover, there needs to be a cost involved in the subversion itself. In the case of Proof of Work cryptocurrencies like Bitcoin, this cost is enormous because miners use energy-intensive ASIC machines to verify transactions and add blocks.

    What Is Maker?

    What Is Maker?

    A Step-by-Step Guide to One of DeFi Most Influential Lending Protocols

    Then, they generate a hash as their Proof of Work. An entire nation-state would have to coordinate and produce enough hash rate power to attempt such subversion. And even then, it would fail because other miners would coordinate to kick them out.

    Cryptocurrencies are self-maintaining because miners receive rewards to process transfers. This gives them a powerful incentive to maintain the network in good faith.

    Every time someone pays a fee to transfer cryptocurrencies, this fee goes to miners/validators. Because of this, a cryptocurrency like Bitcoin doesn’t need to have any owners, CEOs, accounting department, or customer support.

    Without these central points of failure, cryptocurrency maintains itself, and it monetizes itself. This is why it gains value as a decentralized, trustless asset that cannot be subverted. One should keep this in mind when valuing thousands of other cryptocurrencies.

    Series Disclaimer:

    This series article is intended for general guidance and information purposes only for beginners participating in cryptocurrencies and DeFi. The contents of this article are not to be construed as legal, business, investment, or tax advice. You should consult with your advisors for all legal, business, investment, and tax implications and advice. The Defiant is not responsible for any lost funds. Please use your best judgment and practice due diligence before interacting with smart contracts.



    Source link

    Share. Facebook Twitter Pinterest LinkedIn Tumblr Email

    Related Posts

    Global race for digital money dominance: Who will set rules for this new era?

    Cryptocurrency

    The High Potential Cryptocurrency to Invest in August 2025

    Cryptocurrency

    Man arrested for illegal cryptocurrency transactions worth over Rs 7.8 million – The Himalayan Times – Nepal’s No.1 English Daily Newspaper

    Cryptocurrency

    Cryptocurrency News Live: Bitcoin, Ethereum, Solana, memecoin prices today; check latest updates

    Cryptocurrency

    Cryptocurrency News Live: Bitcoin, Ethereum, Solana updates; check prices, trading activity, m-cap

    Cryptocurrency

    Five Strategies to Strengthen Your Position as a Reputable Broker

    Cryptocurrency
    Leave A Reply Cancel Reply

    Top Picks
    Stock Market

    Markets surge on RBI rate cut hopes; Sensex up 443, Nifty at 24,750

    Stock Market

    Up 23% in a month; this largecap to meet today for dividend: Should you buy?

    Commodities

    Elyse Energy : l’une des trois usines du projet à 2 milliards d’euros n’ira finalement pas à Lacq

    Editors Picks

    les auteurs de BD dessinent sur un concert de hard rock

    January 29, 2025

    Vicinity Energy Honored with North America Utilities Deal of the Year Award at Proximo Congress 2025

    July 13, 2025

    Getting Started in the Agricultural, Forestry and Mining Sectors – United Nations Environment – Finance Initiative

    October 21, 2024

    Dividend Stocks To Consider In March 2025

    March 10, 2025
    What's Hot

    The U.S. Is Quietly Building Several Renewable Energy Megaprojects

    August 18, 2024

    Escape to the Country buyer rejects dream property over major issue | TV & Radio | Showbiz & TV

    April 28, 2025

    Al Jouf Agricultural Development annonce une mise à jour du protocole d’accord avec E Green Global (EGG) Korea -Le 11 mars 2025 à 14:45

    March 11, 2025
    Our Picks

    Utility will pay $20 million to avoid prosecution in Ohio bribery scheme – News-Herald

    August 14, 2024

    Billionaires Are Deciding to Sell This Popular Cryptocurrency

    October 12, 2024

    Carcass: the story behind the Heartwork album

    October 16, 2024
    Weekly Top

    Private Credit Is Targeting Fintech Loans

    August 5, 2025

    Wheaton Precious Metals Up Over 6%, on Track for Record High Close — Data Talk

    August 5, 2025

    Nigerian firm to develop deep-water port, economic zone in St. Kitts

    August 5, 2025
    Editor's Pick

    European Shares Dip As Tech And Commodities Weigh On Markets

    July 19, 2024

    UK house prices drop by more than £5,000 in August

    August 25, 2024

    Vermilion Energy Inc. Confirms Q3 2024 Release Date and Conference Call Details

    October 23, 2024
    © 2025 Invest Intellect
    • Contact us
    • Privacy Policy
    • Terms and Conditions

    Type above and press Enter to search. Press Esc to cancel.