In an era where people and objects are increasingly becoming digitalized, currencies are following the trend. Cryptocurrencies have exploded in popularity in recent years, with a combined market capitalization of 27 billion $, obtaining a notoriety and shedding
What are cryptocurrencies?
Cryptocurrencies are digital currencies leveraging a strong cryptography (set of algorithms or codes used in computer security) to secure all its transactions from any attempt of corruption, theft or hacking.
The first and most famous, Bitcoin, was created by an anonymous individual (or group of individual) under the pseudonym “Satoshi Nakamoto”.
This cryptocurrency uses the SHA-256 archetype cryptographic function set as its PoW (proof of work) scheme.
Over the years, more cryptocurrencies were created such as Litecoin, Ethereum, Ripple, Dogecoin; all of them having a number of features differentiating them from each other.
The goal remains the same: integrity, security, and balance of each monetary transfer through a decentralized system.
What is a Blockchain?
This operating system is called a Blockchain, a decentralized network of computers in charge of verifying, recording and transmitting the transactions through a process known as “mining”.
Miners get a small commission that is distributed randomly across miners for verifying the legitimacy of the currency, protecting the network and incentivizing miners to keep providing computing resources.
Each cryptocurrency has its own algorithm, in charge of managing the large quantities of new units issued each year, as well as the different token burn programs. This differs from conventional currencies dependent on banks, which can modify their price at their own discretion.
Another aspect of these algorithms strenghtening the value of cryptocurrencies how difficult a cyber-attack is.
To effectively weaken a given cryptocurrency protocol, the hacker would need to have a computational power greater than 50% of the network of miners.
With a network size the likes of Google, without being centralized, cryptocurrencies are extremely safe and redundant. If one server goes down, another one immediately picks up the computation.
The Libraprotocol Team.
Written by Dionel Alvarado (Spanish Copywriter)
Translated by Grace D (English Copywriter)