What is cryptocurrency?

Cryptography is a subtype of digital money. Digital money is an alternative to physical money such as paper money or coins. Digital money is called digital form  units representing any currency. Digital money, in turn, is divided into virtual money and cryptocurrencies. Virtual money is used, for example, in various computer games, represented as tokens or credits. Cryptographic money is a monetary system that is traditionally characterized by cryptographic (mathematical) security, a decentralized self-regulatory payment system, and network and software transparency. Both virtual money and cryptocurrencies are further subdivided into distributed and centralized monetary systems, depending on how the issuance logic is developed, whether the source code is public and how all development is managed. Distributed cryptocurrency is also characterized by the possibility that it can be used without third parties, such as banks. This means that money can be sent over the Internet from anyone to anyone without a central intermediary. The best known dispersed cryptocurrency today is Bitcoin, but there are over 4,000 other cryptocurrencies ( Coinmarketcap.com  but the actual collection is much larger because many coins / tokens are not included), some of which are centralized, such as Ripple  et al.

Bitcoin cryptocurrency

    • Skandaalne väljaanne Wikileaks hakkas annetustena aktsepteerima bitcoin’e, kuna traditsioonilised annetusviisid olid pankade ja kaardimaksete poolt kinni keeratud.
    • Bitcoin’e hakkas aktsepteerima musta turu keskkond Silk Road.
    • Loodi palju erinevaid krüptoraha uudistele keskendunud ingliskeelseid väljaandeid.
    • Info levis, ökosüsteem hakkas kiiresti kasvama.
    • Ühe bitcoin’i väärtus tõusis 1 dollarini.

    • Suurim bitcoin’i maksete edstaja Bitpay teatas juba 1000 kliendist, kes nende platvormi kasutavad.
    • Asutati mittetulundusühing Bitcoini Sihtasutus (Bitcoin Foundation).
    • Ploki leidmise auhind vähenes 50 bitcoin’ilt 25 peale.

    • 70% bitcoin’iga kauplemisest toimus Mt. Goxi platvormi kaudu.
    • FBI avastas ja sulges põrandaaluse veebipoe Silk Road, kus peamine ostlemine käis bitcoin’idega.
    • Küprosel toimunud panganduskriis ja pangandusraha käime piiramisel võeti alternatiivina kasutusele bitcoin.
    • Kanadas paigaldati esimesed bitcoin’i automaadid.
    • Küprose Nicosia Ülikool hakkas esimese ülikoolina bitcoin’e aktsepteerima.

    • Avastati, et peamisse kauplemisplatvormi Mt. Gox on sisse häkitud.
    • Bitcoin’i hind ületas 1200 dollari piiri ja kukkus siis kiiresti rohkem kui 50%.
    • Microsoft teatas bitcoin’ide aktsepteerimisest Xboxi konsoolidel.
    • Sushicat hakkas Eestis esimese toidukohana bitcoin’e vastu võtma.
    • LHV pank palkas esimese pangana maailmas krüptoraha eksperdi – Asse Sauga.
    • Eestis tehti tolle aja maailma kalleim ost bitcoin’idega teenitud kasumi eest – Soome ärimees ostis miljoni euro eest Malla mõisa.

    • Kanada 20-aastane imelapsest arendaja Vitalik Buterin tuli välja hajutatud tarkvaraarenduse platvormi ehk Ethereumi ideega.
    • Plokiahela iduettevõtete investeeringud ületasid miljardi dollari piiri.
    • Regulaatorid hakkasid bitcoin’i tõsisemalt suhtuma, New Yorgis töötati välja esimene regulatsioon, Bitlicense.
    • Ethereumi ühisrahastusega kaasati kahe nädalaga üle 30 miljoni dollari.

    • Euroopa komisjon kuulutas bitcoin’i käibemaksuvabaks.
    • Levisid mitmesugused kuulujutud bitcoin’i loojast Satoshi Nakamotost.
    • Bitcoin’i inflatsiooniprotsent ehk ploki auhinna suurus vähenes kaks korda, 25 bitcoin’ilt 12,5 peale.
    • Ühte suuremasse kauplemiskeskkonda Bitfinex häkiti sisse ja sealt kadus 120 000 bitcoin’i.
    • Aasta lõpuks ületas bitcoin’i hind tuhande dollari piiri – esimest korda viimase kolme aasta jooksul.

    • USA finantsinspektsioon lükkas tagasi bitcoin’i turuinstrumentide loomise avaldused.
    • Käis pinev diskussioon bitcoin’i skaleerimise üle.
    • Kogukond poolitus ja andmebaas kahestus, tekkis Bitcoin Cash.
    • Algas ICO-de ehk ühisrahastuskampaaniate buum.
    • Hiina keelas ICO-des osalemise.
    • Käivitati Bitcoin’ide kauplemisfutuurid.
    • Bitcoin lõi uusi rekordeid, saavutades tipphinnaks 19 556 dollarit.

    • Kogu krüptorahanduse turu maht kerkis 827 miljardi USA dollarini.
    • Veebruaris mull lõhkes, ühe kuuga kahanes turu maht kolm korda.
    • Aasta esimese kolme kuuga kahekordistus värbamine plokiahela iduettevõtetesse.
    • Esimese kolme kuuga ületati 2017. aasta ICO-desse rahakaasamise 2017. aasta maht, ulatudes 6,3 miljardi dollarini.
    • Maailma suurim ICO, Telegram, tõstis kokku 4,3 miljardit dollarit.

    • Bitcoini hind kasvas aeglaselt ning mõõdukalt ja suutis poole aastaga jõuda 10 tuhande piirini, kuid lõpetas aasta siiski 7 tuhande dollari kandis
    • Suured krüptovahetusbörsid langesid häkkerite ohvriks
    • Uued vaalad ja institutsionaalsed kauplejad
    • Mitu suurt Bitcoini börsi tutvustas marginaaliga kauplemist ja see muutis volüümi aspekte astronoomiliselt

The Bitcoin system is an open source software based on the Bitcoin protocol and a central party-free P2P network, the network nodes of which together maintain a database that reflects all the transactions and ownership of the bitcoins to the recipients or owners. Computers on network nodes in a P2P network participate in mining and transactions. Bitcoin , or cryptographic currency, is the unit of account in this system.

The database or public accounting register, ie the chain of transaction blocks (block chain), reflects all the money in circulation or extracted and the transactions made with it, as well as information on all accounts to which cryptocurrency has been linked. If it is not possible to monitor the movement of specific banknotes in the money circulation, then the bitcoin system makes it possible to monitor the movement of each bitcoin from start to finish. The anonymity associated with cryptocurrency is traditionally emphasized, but as the history of all transactions is visible, it is in some ways a much more open system than the traditional banking system. The opposite situation can occur if special wallet applications or mixers are used to mix traces between bitcoin transfers. Just like different offshore areas in the banking system.

MiningMining is the process by which miners form transaction blocks using a calculation that requires the most resources from already verified transactions and receive new bitcoins for circulation as a reward. The release of new bitcoins will compensate miners for their contribution to the operation of the system. Given that the number of bitcoins received for transaction blocks is declining, at some point the miners’ contribution will have to be offset by service fees.

The miner uses special hardware and software, which often uses ASIC ( application specific integrated circuit ) hardware and the free CGmining software that comes with it. The increase in the computational resources required for mining has led to joint mining activities aimed at increasing the opportunities to earn new bitcoins by pooling computational resources.

First, the first block of cryptocurrency is mined. Bitcoinis created in cycles, where 210,000 transaction blocks are confirmed in each cycle and a total of X bitcoins are issued. In the first cycle, 50 bitcoins were issued for each block, for a total of 10.5 million. After each cycle, the number of new bitcoins generated per transaction block is halved. In 2012, 50 bitcoins became 25 to 07.2016, of which about four years later the prize changed to 6.25, and so on. A total of 21 million bitcoins will be put into circulation, ending 2140 according to the protocol. in.

The transaction block is formed from the data of transactions controlled by the network but not yet included in the transaction blocks. To confirm the authenticity of the transaction block and to ensure the protection against forgery, a cryptographic hash is calculated on the basis of the transaction data, which becomes part of the block and must comply with the rules specified by the bitcoin protocol. This calculation should take about 10 minutes for the entire network of miners. If it turns out that extraction takes longer, the protocol automatically reduces the complexity of the calculation. Otherwise, the complexity of the calculation increases. A block of transactions may contain a very different number of transactions at different points in time (see Number of Transactions per Block ).

In addition to hardware and software, cryptocurrency transactions require a wallet , which consists of digital certificates that allow the owner of the cryptocurrency to be identified and used to access and transact with his or her money. The owner can have several wallets. Otherwise, the comparison with a physical wallet cannot be used – a bitcoin wallet does not hold money.

The Bitcoin system uses public key cryptography. Each database record assigns an amount of cryptocurrency to a specific address, the address being a public domain checksum ( hash value) of the cryptographic key pair. The private side of a key pair is known only to its owner, and the private key is needed to transfer money to another owner. The transaction records are grouped into the transaction blocks described above, each of which has a unique hash generated by a cryptographic hash algorithm. Bitcoin ‘s hash algorithm is SHA-256, litecoin ‘s scrypt , etc.

The human readable form of cryptocurrency addresses is a 33-letter snippet of text, such as “1rYK1YzEGa59pI314159KUF2Za4jAYYTd”. The first letter of the cryptocurrency address is different for each currency ( bitcoin – 1, litecoin – L, etc.). Anyone can create as many different addresses as they can manage, creating addresses is instantaneous and requires no network interaction. The use of one-time and dedicated addresses allows anonymity to be maintained.

Most cryptocurrencies are based on the bitcoin protocol and are modified versions of some of it. However, cryptocurrency systems based on scratch and based on different principles are also entering the market.

For example, the following parameters vary:

  •   network maintenance principle: proof-of-work ( bitcoin , litecoin , auroracoin ), proof-of-work / proof-of-stake hybrid systems ( peercoin , NXT)
  •   block hash algorithm: SHA-256 ( bitcoin, peercoin ), scrypt ( litecoin, dogecoin, auroracoin, 42coin ), Primechain ( primecoin ), Quark ( quark coin ), CryptoNight ( Monero, Bytecoin )
  •   block generation time: bitcoin – 10 min, litecoin – 2.5 min, Ethereum – 20 s
  •   total volume of emissions: bitcoin – 21 million, litecoin – 82 million;
  •   pre-extracted quantity (distribution and formation scheme): bitcoin, litecoin 0%, auroracoin 50% 10

The computer resources required to operate cryptocurrency systems using the proof-of-work protocol are very large and are constantly increasing as the complexity of mining increases. 14. As of April 2014, bitcoin ‘s extraction capacity is 55PH / s (e + 11) (55e + 15 hash per second), the price of electricity consumed in 2013 was. $ 15 million a day at the end of the year, now estimated to be tens of times higher. The Bitcoin system is estimated to use a computer resource that is 1,400 times the total resources of the world’s 500 best supercomputers.

The following is a video (in English) that explains once again how the bitcoin system works.

Also read:  Bitcoin White Paper in Estonian

Logic of transactions

Transaktsioonide loogikaWhy is bitcoin better than regular money

  • International, global.
  • Can be used worldwide.
  • Impossible to counterfeit or imitate.
  • It is impossible to break or manipulate bitcoin on the network. The prerequisite for operation is the internet and the users themselves.
  • Impossible to devalue.
  • Fixed amount network designed. Deflation free money.
  • Publicity of broadcasts. The network is completely anonymous, but public.
  • Impossible to censor.
  • Fast.

Why is bitcoin better than gold

  • Gold is not easily divided into smaller parts. Bitcoin , for example, is divisible by up to 8 decimal places.
  • The value of gold cannot be proved immediately. The value of Bitcoin is verified by the network every 10 minutes.
  • The amount of gold cannot be determined immediately. However, this is better done with bitcoin .
  • Gold is not transferable online. Bitcoin has much better transportability.
  • Gold can be easily confiscated, not bitcoin .
  • Bitcoin ‘s issuance logic is transparent and public.
English