There is no central authority overseeing each transaction. Instead, every computer or “node” on the network validates transactions collectively. There is no central server; each node has a copy of the same information.
Think of it as a digital democracy.
In contrast, commercial banks (the ones you use) are inherently centralized. As a result, banks validate all transactions internally. The information gathered is stored and tracked independently.
This structure makes information accessible to only one user at a time given its single source.
Cryptocurrency
Whenever there is a transaction on a network, it needs to be validated. Let’s say you decided to buy a from someone. That transaction needs to be deemed legitimate — has that coin been spent before?
All the nodes on the network verify a collection of transactions just like yours and arrange them in a “block.” This block is then locked with the equivalent of a virtual padlock. When unlocked, those transactions become part of the where they are permanent.
But who opens these virtual padlocks? Here enter the “miners.” Using , miners get to work trying to find the key. On the network, the successful miner receives bitcoins as a reward for opening the lock. This process is how bitcoins enter into circulation.
Your Money
In contrast, central banks create fiat currency by printing it. This centralized system allows banks to control the supply of money in the economy at any given time (monetary policy). Instead of relying on a network of nodes to validate transactions, commercial banks take on this work internally. And rather than being paid in bitcoins, banks collect transaction fees.
The Future of Cryptocurrency
Those who believe in are usually all in, while those against are vehemently so. There are some that believe and its underlying will revolutionize other industries such as law, education, and healthcare.
However, there are significant challenges to overcome before can gain widespread . The most notable of which is how governments around the world respond through and oversight. As we’ve seen already, this process is often messy and complicated.
It’s no secret that governments will play a significant role in the success or failure of . For this reason, it’s hard to say how it will all shake out. What we do know is that history tends to repeat itself and it’s sure to be a wild ride.
Published at Sun, 12 May 2019 00:23:28 +0000
