The hot topics for past 6 months is what is Bitcoin and how to mine or invest in bitcoin.By the way in order to under stand what a Bitcoin is we need under,certain of terminology on Cryptocurrency is really important.Since this would a big topic which I'm splitting into multiple posts.
What is Cryptocurrency?
Cryptocurrency is roughly the equivalent of using PayPal or a Debit Card, except the numbers on the screen represent cryptocurrency instead of a fiat currency like a dollar. Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies. Cryptocurrencies use decentralized control as opposed to centralized electronic money and central banking systems. The decentralized control of each cryptocurrency works through a blockchain, which is a public transaction database, functioning as a distributed ledger.
In this Bitcoin is one of the type of Cryptocurrency and any currency apart from Bitcoin is termed as "ALT-Coins" or Alternative coins.
Bitcoin — The first ever cryptocurrency that started it all.
To List some of famous ALT-Coins
1.Ethereum — A Turing-complete programmable currency that lets developers build different distributed apps and technologies that wouldn’t work with Bitcoin.
2.Ripple — Unlike most cryptocurrencies, it doesn’t use a Blockchain in order to reach a network-wide consensus for transactions. Instead, an iterative consensus process is implemented, which makes it faster than Bitcoin but also makes it vulnerable to hacker attacks.
3.Bitcoin Cash — A fork of Bitcoin that is supported by the biggest Bitcoin mining company and a manufacturer of ASICs Bitcoin mining chips. It has only existed for a couple of months but has already soared to the top five cryptocurrencies in terms of market cap.
4.NEM — Unlike most other cryptocurrencies that utilize a Proof of Work algorithm, it uses Proof of Importance, which requires users to already possess certain amounts of coins in order to be able to get new ones. It encourages users to spend their funds and tracks the transactions to determine how important a particular user is to the overall NEM network.
5.Litecoin — A cryptocurrency that was created with an intention to be the ‘digital silver’ compared to Bitcoin’s ‘digital gold.’ It is also a fork of Bitcoin, but unlike its predecessor, it can generate blocks four times faster and have four times the maximum number of coins at 84 mln.
6.IOTA — This cryptocurrency’s breakthrough ledger technology is called ‘Tangle’ and it requires the sender in a transaction to do a Proof of Work that approves two transactions. Thus, IOTA has removed dedicated miners from the process.
7.NEO — It’s a smart contract network that allows for all kinds of financial contracts and third-party distributed apps to be developed on top of it. It has many of the same goals as Ethereum, but it’s developed in China, which can potentially give it some advantages due to improved relationship with Chinese regulators and local businesses.
8.Dash — It’s a two-tier network. The first tier is miners that secure the network and record transactions, while the second one consists of ‘masternodes’ that relay transactions and enable InstantSend and PrivateSend type of transaction. The former is significantly faster than Bitcoin, whereas the latter is completely anonymous.
9.Qtum — It’s a merger of Bitcoin’s and Ethereum’s technologies targeting business applications. The network boasts Bitcoin’s reliability, while allowing for the use of smart contracts and distributed applications, much how it works within the Ethereum network.
10.Monero — A cryptocurrency with private transactions capabilities and one of the most active communities, which is due to its open and privacy-focused ideals.
11.Ethereum Classic — An original version of Ethereum. The split happened after a decentralized autonomous organization built on top of the original Ethereum was hacked.
12.Z-cash -The first open, permissionless financial system employing zero-knowledge security.
13.TRON -TRON is a decentralized open-source cryptocurrency that was founded by TRON Foundation. TRON is an application intended to allow content creators to be compensated for sharing their content.
How is Cryptocurrency Generated?
With Cryptocurrency miner use special software to solve mathematical problem, and they are usually paid in terms of fraction of the cryptocurrency for the share of the problem they share in achieving the solution.And each time this solution is solved a the difficulty of this mathematical problem increases depended on how fast the problem is solved.In early days the problem was solved using the normal PC -CPU(Central Processing Unit), but later the miner found that any mathematical problems can be solved using GPU even faster than normal CPU mining.Anyways the drawback of this GPU mining was that it was getting way expensive for a GPU/Video card , consumes very high power and generated a lot of heat.
Later in order to mine any crypto currency ,ASIC(Application specific Integrated circuits) chipset was produced in order to solve this problem more effective, with low power consumer increasing the potential to mine more with less power supply.ASIC is very effective only for Bitcoin mining operations.
AS the popularity of Cryptocurrency increased more , and more miner started to mine making it difficult for individual miner to mine enough and so a mining pool was started to over come this problem.
A mining pool would simply have a group Miners working on solving problem , sharing the Hardware capabilities to solve the problem.And share the transaction values based on the share a individual was able to solve a problem.
What is BLOCK Chain
A blockchain, is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a hash pointer as a link to a previous block, a timestamp and transaction data. When a peer-to-peer cryptocurrency transaction is made, that transaction is sent out to all users with “full node” wallets. Specific types of users called miners then try to solve a cryptographic puzzle (using software) which lets them add a “block” of transactions to the ledger. Whoever solves the puzzle first gets a few “newly mined” coins as a reward. Sometimes miners pool computing power and share the new coins. The algorithm relies on consensus. If the majority of users trying to solve the puzzle all submit the same transaction data, then it confirms that the transactions are correct.
Your next question would be , I would I get paid for If I had solved their problem.Well you need to create a WALLET, to save all the confirmed amounts and each and every Cryptocurrency
has its own wallet or you would have generic/common wallet that you can use.This I would be talking to you on next set of articles.
How does a transaction in Cryptocurrency Work.
A transfer of funds between two digital wallets is called a transaction. That transaction gets submitted to a public ledger and awaits confirmation. When a transaction is made, wallets use an encrypted electronic signature (an encrypted piece of data called a cryptographic signature) to provide a mathematical proof that the transaction is coming from the owner of the wallet. The confirmation process takes a bit of time (ten minutes for bitcoin) while “miners” mine. Mining confirms the transactions and adds them to the public ledger.