What is Cryptocurrency?
Published on: 11 Apr 02:10
If you’re like most people, you probably have a vague idea about what cryptocurrency is. Isn’t that how it’s supposed to be — cryptic? cDuel is the best cryptocurrency trading simulator game. Our mission is to educate you on cryptocurrency, what it is, and how to trade it. Our game offers a no-risk environment in which you can trade using real-time market prices based on actual cryptocurrency, providing you with a real-life trading experience while competing against others to achieve the highest rate of return. Below, we’ll introduce you to cryptocurrency and why it shouldn’t remain cryptic any longer.
WHAT IS CRYPTOCURRENCY?
Cryptocurrency in its essence is a digital currency. The idea to create a digital currency has been around since the 1990s, with attempts to do so all failing. The inventor, Satoshi Nakamoto, saw that the problem was all of these pioneers in cryptocurrency were trying to create a centralized currency, like the Federal Reserve System in the United States is our central authority on money-making decisions. His idea: make cryptocurrency decentralized and it worked.
HOW EXACTLY DOES CRYPTOCURRENCY WORK?
To have cash, you’ll have to have a payment network with account, balances, and transactions, just like your bank. However, the problem all banks and cash entities face is how to prevent double spending: how the same person spends the same amount twice. It has to be debited from the account and credited to another, but who is going to do that? In a regular bank, it’s a central server that also has checks and balances to ensure it’s working properly, and no one is cheating.
When there is no central network or server, every single entity in this network has to perform this job. Lists must be maintained of transactions so future transactions can be checked against the master list to ensure funds are available. However, this could easily lead to disagreements, and if there is no trust in the system, the system won’t function.
A consensus of all transactions is needed. But who is going to be the final voice of consensus in a decentralized network of digital currency? Cryptocurrencies solved this problem.
DEFINITION OF CRYPTOCURRENCY
This leads us to a more exacting definition of cryptocurrency. Cryptocurrency is limited entries in a database that no one can change without meeting certain conditions. Ironically, this is how you define all currencies, including what’s in your wallet. Think about your checkbook: it’s just entries written on paper that keeps track of what’s in your account. Even the physical money you spend is an entry in someone’s register. Hence, money is a verified entry in a database that keeps track of accounts, balances, and transactions.
THE INS AND OUTS OF DIGITAL CURRENCY
A cryptocurrency has a network of peers. These are participants in the market or those who hold cryptocurrency — anyone really who has a cryptocurrency account with credits. Every peer has access to the records and balances of every account. Hence, if you want to perform a transaction with someone, you fill out your transaction (think deposit and withdrawal slips at a bank) and send it out to every peer. Then one peer will act on the transaction and record it. The entire network knows about the transaction. However, every transaction has to be confirmed before it can become final. Thus, in banks, the bank does the transaction, not some other customer at your bank. The bank records it with no outside verification; just our trust that it has been done.
Confirmation is key in cryptocurrency and makes the whole platform possible. As long as the transaction is unconfirmed, it is incomplete. Once confirmed, it cannot be reversed and becomes part of the blockchain, which is the immutable record of historical transactions in your cryptocurrency.
Here’s where another cryptic term comes into play: the role of miners. Miners in cryptocurrency are those whose sole job is to confirm transactions. They stamp them as legit and distribute the transaction to everyone. This transaction is then added to the blockchain. For doing this, miners are paid with tokens of cryptocurrency, such as in Bitcoins.
THE ROLE OF MINERS IN CRYPTOCURRENCY
There are no job qualifications to be a miner; anyone can do it. However, due to the power they hold, miners need to have some sort of check and balance to prevent abuse in the digital currency system. Enter the proof-of-work concept, which basically means the miners have to solve each block problem, connecting the new block to its predecessor, competing against other miners to find the solution to the mathematical problem first and be rewarded. When the solution is found, a block is built and added to the blockchain. A new Bitcoin is produced, which is limited by the puzzle since the amount of computer power the miner has to invest is substantial to solve these puzzles. This is the check: only a certain amount of cryptocurrency can be created at a given time, limiting the miners.
This results in a no-trust needed system, meaning, because of all the checks and balances and the openness of all the transactions, you don’t have to trust the person you do a transaction with. Can you say the same thing about your bank? You are trusting them with your money. Banks can change things in your account without your knowing (overdraft fees, anyone?) and create rules as well that you must abide by. Banks works on trust, and that’s why banks work so hard to win your trust.
In this, you’ve found the potential key to cryptocurrency, and it’s predicted explosion. With cryptocurrency, there are no limits with whom you can trade (you can trade with someone in Siberia and Japan) and no worries about if the transaction is valid (think back when someone wrote you a check and it bounced, because they didn’t have the money in their account).
THE MEANING OF CRYPTOCURRENCY
Now, we finally understand how cryptocurrency got its name since, as you’ve seen, there is nothing cryptic or hidden about it. Using a decentralized consensus database, cryptocurrencies are entries about tokens in the system. The security system behind this is called cryptography (the art of writing or solving problems), which in essence is math.
Most of us don’t remember the Great Depression, caused in part by banks that failed to meet their obligations. More than 9,000 banks had failed by 1932, with the invention of the “bank holiday” by President Franklin Delano Roosevelt to minimize the run on banks. With cryptocurrency, odds are better that you’ll be struck by a comet than a bitcoin block will fail once confirmed.
CDUEL AND CRYPTOCURRENCY TRADING SIMULATORS
cDuel understands that this digital currency system can be complicated because it’s not the monetary system we have all grown up with. There is definitely a learning curve as well, mainly as your brain wraps itself around the whole concept of digital currency. cDuel exists to provide you with a safe, no-risk learning platform, so you can learn cryptocurrency trading. Through utilizing our fantasy cryptocurrency trading game, you’ll gain valuable skills and knowledge about the current cryptocurrency exchange markets while you have fun trying to maximize your returns on your personal portfolio.
Investing feet first is not something cDuel recommends. The cryptocurrency market can be volatile and without a firm grasp on the ins and outs of cryptocurrency and trading cryptocurrency, you can be setting yourself up for major financial losses. Trading cryptocurrency requires practice to fully understand the process. With our crypto simulator, you’ll be able to hone your skills in a competitive environment. To learn more, visit our blog regularly where we will be expounding on all things related to cryptocurrency in an effort to help you succeed in trading cryptocurrency. Sign up today!