Welcome to our free course on "Cryptocurrencies." This course will teach you the basics of digital currencies and explain the concept of blockchain, mining, trading, and investment in the digital currency market.
Chapter One:
The first chapter of this course aims to simplify the idea of digital currency! Sit back, relax, and enjoy reading about the innovation of cryptocurrencies.
Chapter One: What is encrypted digital currency?
(1) The emergence of digital currencies
Let's take a look at the pioneers of this technology and its history.
Before Bitcoin
The emergence of digital currencies dates back to 1980 when 'David Chaum' founded DigiCash in the Netherlands.
What concerned 'David' the most was the issue of privacy protection on online payment sites and the ease of obtaining credit card information and personal information, as they were not adequately protected, which drove him to work on a new type of technology to get something that prevents banks or governments from intruding on online payments.
Despite its success in creating that technology, the lack of adopters and supporters for the company led to its bankruptcy in 1998.
That was the end of the company; however, it was not the end of the core idea of increasing privacy and protection. In the same year, crypto responsible Nick Szabo invented BitGold, which later led to Bitcoin and the rapid spread of encryption.
The emergence of Bitcoin
In 2008, 'Satoshi Nakamoto,' the pseudonym for an unknown person or group of people, outlined the complete framework of Bitcoin in a newspaper.
You can read that article here: https://bitcoin.org/bitcoin.pdf
It didn't take long between the issuance of that newspaper and the emergence of Bitcoin; it was launched to the public in 2009.
This experiment was not without flaws; due to the age of the technology, a technical problem arose that made it difficult to know whether a person used their money or not, meaning that theoretically, the same money could be used twice. Satoshi was the first to solve this problem.
The problem of digital currency counterfeiting before Satoshi's article was a serious issue; digital counterfeiting was much cheaper than counterfeiting paper or coin money.
Therefore, overcoming this problem was a great success for Bitcoin and its future, and since then, over 1500 different codes have emerged in the nine subsequent years, even including non-genuine codes.
In the end, it should be noted that codes may differ from each other according to variable factors, but they all share three foundational pillars that serve as the cornerstone we must analyze to understand encryption.
(2) Foundations of digital currencies
To understand the rules of cryptocurrencies, we must analyze and understand the three pillars upon which they are based and how they affect encryption.
'The foundational pillars'
The foundational pillars upon which encryption rules are based are divided into three columns that must be understood first:
*Decentralization: How does it form? Who owns encryption?
*Security: How are these currencies protected? And how are you personally protected?
*Transparency: How do these currencies differ from the currencies we currently possess? What makes these currencies available online?
By analyzing and understanding each of these points, we will be able to understand the word encryption, which will pave the way for understanding something larger.
Decentralization
To understand this point, we must first explain centralization and compare it with decentralization; we can do this by understanding the banking system's dealings with money.
Imagine you are a busy worker bee gathering a certain amount of honey every day, and the queen bee helps you store what you have collected in her honeycomb. It may seem great at first until you discover that the queen bee has complete control over your honey; she knows exactly how much honey you bring in each day, how much you consume daily, and how much you save. Not only that, but she also uses some of your honey for her own benefits.
It has an incredible amount of control over your honey, all in one place, a specific and unfortified spot controlling the entire system; if an attack occurs on that spot, the entire hive will be destroyed, and you will lose all the honey you have. This is the weakness of centralized banking systems.
First of all, we must understand that cryptocurrencies are a digital format of currencies as they do not operate on a queen bee model (like banks and governments). Unlike the old centralized network, encryption relies on a decentralized network system that does not require a central authority.
These networks operate in two fundamentally different ways; looking at the following two images, you will notice that both allow communication between all points in the network, but the difference in structure alters the way it works.
As decentralization distributes power and control, traditional old systems centralize it.
Encryption cannot be established without a strong group of people behind it, who are considered the worker bees responsible for creating this encryption network, and they do not need a queen bee to take care of their honey because of this distribution.
The difference in structure has many advantages:
Firstly: No attack can easily affect the entire system; simply put, there is no specific point to target.
Secondly: This system prevents entities from owning control over your financial resources, but this is more theoretical than practical; there are designers who can still change some variable factors in their accounts.
Thirdly: It removes your need for a bank to take care of your money, as the decentralized system distributes control across the entire electronic communication network.
Security
The existence of cryptocurrencies is limited to the internet only, as there are no physical currencies. This raises questions about protection, security, and also formation.
The answer to these questions lies in the name itself 'cryptocurrencies'
Encryption is the process of transforming information into a new composition that cannot be read unless you have the private key to decrypt it. This is how information remains protected in the world of encryption.
You may have heard before about the FBI or many other difficulties in accessing communication and messaging applications on phones or computers, and this is because they are encrypted. Accessing the right key to decrypt this information is a very difficult process, and without obtaining the right key, you cannot read this information.
This is the backbone of encryption, which protects all commercial transactions there.
Anonymity comes at the top of encryption, which gives us more protection. You are not required to disclose your name or address as in banks. You also have a private key and a public key; no one can know your public key unless you give them this information. As for your private key, it must remain a secret and can be found in your 'digital wallet.'
This wallet serves to store, send, and also receive all your codes, functioning as a private record holding all your commercial transactions.
It is difficult for anyone to access your complete identity through your public key, as protecting your private data is extremely important these days since the importance of private data increases every day, and thus protection laws must be stronger.
Fortunately, codes are sent and received with privacy and transparency, which is the core value of encryption.
Remember that: The science of encryption protects you and your codes in a complex way without needing banks, providing you with confidentiality and independence.
Transparency
Undoubtedly, digital or encrypted currencies are among the most protected and transparent currencies in the world.
Customer-facing sites are considered the weak point in the world of encryption, and they are the targets of most criminals and hackers, especially financial exchanges. By achieving security and transparency lies the value of encryption.
Looking at how this is achieved these days, we find that encryption focuses on a digital system called blockchain, where blockchain is the core heartbeat of cryptocurrencies, providing the foundational program for cryptocurrency encryption.
Pioneers in this field were convinced of the urgent need for more secure transactions online, as credit card details, home addresses, and phone numbers are not secure enough. This is where blockchain technology emerged, allowing us to create virtual currencies and subsequently the emergence of Bitcoin.
So what does blockchain mean?
It is a system that records and verifies the validity of all transactions made for cryptocurrencies, growing with each new transaction as each new transaction adds a new block to the chain created before, hence its name blockchain. The parts of this chain are also ordered chronologically.
Blockchain serves as a public accounting ledger for currencies, thus achieving security and transparency standards.
As for your true identity, it remains completely confidential as you do not enter any of your personal data, while your public key is the only information about you, serving as your account number.
Along the blockchain, everyone can see and accept all business transactions, all while keeping the identity of each user concealed.
Don't worry if you can't understand some things here; it is complex, and in the next chapter, everything will be simplified.
Remember that:
-The blockchain technology maintains user privacy and the transparency of currencies.
-By recording all business transactions, you can see the entire history of the code.
(3) How is the value of cryptocurrencies determined?
Analysts and experts have disagreed on determining the value of cryptocurrencies. Although this topic is somewhat complex, it is of utmost importance, so let's take a quick tour discussing how these currencies gain their value.
Supply and demand
Gold, oil, and diamonds are limited resources, and they share this point with encryption; most codes have a limited number of digital currencies available for investment.
Achieving balance in the supply of digital currencies to maintain their value is one of the most critical aspects of the encryption process, as the difficulty of obtaining cryptocurrencies changes depending on the number of demanders (demand size); the more the number of demanders, the more difficult it becomes to break the code, which maintains the balance of supply and demand.
Meeting this demand requires time, money, and energy, as codes are created through a process known as 'mining', which is an intensive process that gives cryptocurrencies their value.
Speed and accuracy
The ease of using encryption is a focus for many new currencies, as you do not need to pay high fees or consume long times for transactions in the world of encryption.
If we take Bitcoin as an example, we find that it has high fees and also a long transaction time; improvements to Bitcoin represent a significant portion of the spread of codes in our world today.
Bitcoin remains successful because it has been adopted by users. Today, the average value of the cryptocurrency is higher. If Bitcoin had been created now, it would not have achieved the same success.
Different technologies such as blockchain and hashing are currently being focused on developing, as many new codes are being developed and their performance improved.
If we take a look at some new codes, we will find prominent words like: 'transaction speed' and 'accuracy and reliability,' as these words are not used sparingly or casually, which means that the search for new codes is ongoing and necessary.
News
News is one of the most influential factors changing value. Cryptocurrencies are still in their infancy (9 years), so laws, companies, financial institutions, and regulations need time to keep up with them. The decisions made by these institutional forces affect the value of cryptocurrency. However, the old rules system does not apply to this modern technology.
The law of numbers and its protection is part of the economy and needs improvement, as it is not developed enough on the internet networks these days. The way laws surrounding codes are created is still largely unknown, creating a mysterious and complex climate for codes.
The continuous growth of digital law will have a significant impact on the world, as it proves its central importance for the future of encryption. Governments are now dealing with and observing cryptocurrencies, indicating an unpredictable future for cryptocurrency laws.
Power to the people
Codes enable individuals to control their money in everyday life, and cryptocurrencies can provide us with a safer platform to manage our wealth, and we can say this is the most valuable feature of digital currency encryption.
Some governments cannot control the health and monitoring of their currency, so what options are available to those who face this problem? How can parents prepare for their families if this is the reality?
Cryptocurrencies stand as an alternative option for many people in developing countries like Zimbabwe, South Africa, and Nigeria, where individuals around the world suffer from unstable financial systems, while encryption provides an option for those without alternatives.
The future value of cryptocurrencies:
In the end, the discussion about the value of cryptocurrencies continues. This brings many questions into the discussion we have just begun to address. Over the coming years, we will see significant progress in how societies value encryption; technology and law will evolve. Although the future of digital currencies is unknown, it is exciting!
Then we can see codes that replace our currencies and then we all transition to a more digital world.
So, we now have an idea of what cryptocurrencies are; let's take a look at the structure that makes this possible, the blockchain.
Tomorrow we will continue... This point will be simplified and explained in detail.
