A cryptocurrency (or crypto
currency) is a digital asset designed to work as a medium of
exchange that uses strong cryptography to secure financial
transactions, control the creation of additional units, and verify the transfer
of assets. Cryptocurrencies use decentralized controlled as
opposed to centralized digital currency and central banking systems.
The decentralized control of each cryptocurrency works through distributed
ledger technology, typically a blockchain, that serves as a public
financial transaction database.
Bitcoin, first released as open-source software in 2009, is generally
considered the first decentralized cryptocurrency. Since the release of
bitcoin, over 4,000 altcoins (alternative variants of bitcoin,
or other cryptocurrencies) have been created.
A blockchain, originally block chain, is a growing list of
records, called blocks, which are linked using cryptography. Each block
contains a cryptographic hash of the previous block, a timestamp, and transaction
data (generally represented as a merkle tree root hash).
By design, a blockchain is resistant to modification of the
data. It is "an open, distributed ledger that can record transactions
between two parties efficiently and in a verifiable and permanent way".
For use as a distributed ledger, a blockchain is typically managed by a
peer-to-peer network collectively adhering to a protocol for inter-node
communication and validating new blocks. Once recorded, the data in any given
block cannot be altered retroactively without alteration of all subsequent
blocks, which requires consensus of the network majority. Although blockchain
records are not unalterable, blockchains may be considered secure by design and
exemplify a distributed computing system with high Byzantine fault tolerance.
Decentralized consensus has therefore been claimed with a blockchain.
Blockchain was invented by a person using the name Satoshi
Nakamoto in 2008 to serve as the public transaction ledger of the
cryptocurrency bitcoin. The identity of Satoshi Nakamoto is unknown. The
invention of the blockchain for bitcoin made it the first digital currency to
solve the double-spending problem without the need of a trusted authority or
central server. The bitcoin design has inspired other applications, and
blockchains which are readable by the public are widely used by
cryptocurrencies. Blockchain is considered a type of payment rail. Private
blockchains have been proposed for business use. Sources such as Computerworld
called the marketing of such blockchains without a proper security model
"snake oil".
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