7 Basics about Cryptocurrency to know before you invest in
One of the most popular agenda items of recent years is cryptocurrencies. Although these new currencies, which entered our lives about 8-9 years ago, were developed quietly for a while, they have attracted the attention of everyone from heads of state to giant investment companies for a few years.Read the article to the end ⬎
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We will try to address the important details of cryptocurrencies, which are still a big question mark for end users, who are a little far from the world of technology and the internet, under different headings. Thus, a series will be created in which everyone can understand cryptocurrencies more easily, and we will clarify what those who want to be actively involved in this issue should do in the future, because cryptocurrencies still reach a niche audience even in the technology community.
1. What is Cryptology?
When talking about cryptocurrencies, it is useful to first clarify what "crypto/cryptology" is. Cryptology is a science of encryption. We can also describe it as the process of encrypting data (text, number or any message) according to a certain system, sending it to the receiver through a secure environment and decrypting this encryption system and revealing the data.
2. What is cryptocurrency?
Cryptocurrency is a digital and virtual currency that uses the science of cryptography for security and they are encrypted based on mathematics. In fact, we have been using these coins for years in our bank cards, virtual cards or in every transaction we make in the virtual environment. We were spending money virtually, without physically leaving the bank's safes, and in a way, these coins were also cryptocurrencies because only numerical changes occurred in the systems. We can say that the new generation of cryptocurrencies basically works with this logic. The main reason why it is attracted and loved so much compared to other currencies in the world is that it has an organic structure. So it is not managed by any government or central authority, yet. This makes this currency more secure.
3. Emergence of cryptocurrency
We know from history books that the basis of the monetary system we use was revealed by the Lydians. So how did crypto money first appear? This is probably one of the biggest mysteries of the internet world right now, who came up with the first cryptocurrency, bitcoin? As the founder of Bitcoin, all sources point to the name " Satoshi Nakamoto ", but the interesting thing is who or what this name represents.Unknown. In other words, Bitcoin is an open source software developed by a person or group using the pseudonym Sahoshi Nakamoto, which we can call the ancestor of cryptocurrencies (since Bitcoin is the first and most widely adopted cryptocurrency by society). Although there are many rumors circulating, it is not known exactly who or who the equivalent of this name is at the moment.
4. How is cryptocurrency produced?
We mentioned that coins are not dependent on a central authority or government. The production of these coins, just like their assets, has a completely user-based model. The first thing we need to know is that every cryptocurrency has a certain production limit. If we take Bitcoin as an example, only 21 million bitcoins can be found in the first published protocols. So it has a limit in terms of production. For this reason, the demand for this coin is increasing day by day because it is getting harder and harder to find and it is broken into smaller pieces.
Read the article: How to invest in cryptocurrecy?
If we go back to the production process, the cryptocurrency production process is literally in the form of mining. In other words, just as excavations are made to find gold, mathematical problems are tried to be solved by software to find crypto money. Since everyone has the right to solve and produce, we can say that the person who works the most produces more. Yes, if you have the necessary technological systems (mainly processor power and internet connection), you can be one of these manufacturers.
Is cryptocurrency safe?
We can say that crypto money is basically safe, especially since it cannot be managed by a central authority. The biggest risk they face is that your mines, that is, your crypto money, on physical computers if they are not transferred to a virtual wallet, can be lost as a result of the crash of these computers. Another threat is hacking. Due to the transaction volume exceeding billions of dollars, cryptocurrencies can be attacked a lot. Of course, you can also suffer from these attacks, but I don't think this risk makes much sense in the face of the risks we face in all areas of life. The basis of the security of cryptocurrencies is based on a technology called a blockchain.
What is blockchain?
Blockchain, which literally means "blockchain", actually meets this meaning. We have shared the technical definition of "a distributed database providing encrypted transaction tracking" as a stand-alone article before. Blockchain, which is most popular with bitcoin, is actually a technology that can be used anywhere there is "data". In Bitcoin, blocks can contain information about cryptocurrency exchanges, while in the health sector, they may contain the smallest medical information of patients. Since this system is used in blocks and distributed, it becomes impossible to track. The information coming from you cannot be accessed, managed, or directed by anyone until it reaches the other party and the codes match and this information is revealed.
If we consider the blockchain technology used in Bitcoin, money exchange information is carried on blocks and the accuracy of each transaction is ensured by people called miners who solve problems to earn "bitcoin". Thus, the accuracy of the operation is finalized.
Why governments hate cryptocurrency?
The reason why cryptocurrencies are perceived as a threat by states is that they can be used very easily for illegal activities such as money laundering and tax evasion. Since these coins are kept in virtual ledgers and these ledgers are in a way divided into millions of users' computers, they cannot be followed by a central authority. This is something that shuts down governments. For similar reasons, banks and non-governmental organizations continue to put pressure on governments in this regard.