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What are cryptocurrencies?

Imagine that, instead of using coins and bills, the money was represented in giant stones anchored to the floor. Instead of moving the stones, only their property is transferred and everyone knows whose stones they are from. This makes it difficult to commit fraud, since you could not spend the stones of others, you could not use the same stone twice, and you could not carve a new stone either. This is the cryptocurrency concept, but unlike the anchored stones, cryptocurrencies can scale for more people to use them.

Bitlicense , the first license for digital currencies in the United States issued by the State of New York, defines cryptocurrencies as "any type of digital unit created or obtained through mathematical calculation, whose system is based on the internet and which is used as a means of of exchange or a form of digitally stored value ".

Using the principles of cryptocurrency, we can go on to explain what specific characteristics bitcoin has:

It is a decentralized cryptocurrency, so there is no regulatory or currency management authority. On the contrary, there is a "ledger", such as those used by accountants, which records all transactions in the order they were carried out. Also, put a "stamp" with the time they happened.

There is also a network that has access to the "ledger", called Blockchain . So, instead of there being only a single copy of the registry, there is a network that allows virtually everyone to have access to the transaction log. When there is a new transaction, everyone automatically receives the update, so you can not spend the same currency twice. If you try to use it more than once, the whole network would find out.

You can not falsify the currency, because the units "print" from complex mathematical problems. Every few minutes, a new problem is created and the different parts of the network try to solve it; Those who solve the problem quickly will get bitcoins as "prize". This compilation process is called "mining". There is no way to falsify answers, fake cryptocurrencies, or invent problems outside the marked times, which limits the number of existing units.

The certification of the transactions is done by people connected to the network called "miners" who provide their computational infrastructure to verify the transaction with the incentive of obtaining the cryptocurrency.

When one of the parties has already made a cryptocurrency, its possession is certified and is already in its full ownership, to be deposited in a digital wallet, which can be stored on your computer or cell phone (as if you kept your money in the mattress) or online, in Bitcoin backup and exchange servers (as if you were depositing them in security vaults).

As time goes by, there will be more digital units on the market, so that each time they begin to become more complicated, mathematically speaking. As the number of participants also increased, there is an exponential follow-up to the transactions. Currently the bitcoin network has a computational power greater than the 500 most powerful supercomputers combined. The only way to introduce a false operation would be to overcome this computational power, so that every day is more difficult to make a fraud.

Since there are more than 700 different digital currencies, one could say that there is the same number of major books or Blockchains that record all the activity of the cryptocurrency type or ecosystem of which they keep records.

What is the innovation behind bitcoin?