Introduction

A cryptocurrency is a digital or virtual currency designed to work as a medium of exchange. It uses cryptography to secure and verify transactions as well as to control the creation of new units of a particular cryptocurrency. Essentially, cryptocurrencies are limited entries in a database that no one can change unless specific conditions are fulfilled

History

There have been many attempts at creating a digital currency during the 90s tech boom, with systems like Flooz, Beenz and DigiCash emerging on the market but inevitably failing. There were many different reasons for their failures, such as fraud, financial problems and even frictions between companies’ employees and their bosses.

Notably, all of those systems utilized a Trusted Third Party approach, meaning that the companies behind them verified and facilitated the transactions. Due to the failures of these companies, the creation of a digital cash system was seen as a lost cause for a long while.

Beginning

Then, in early 2009, an anonymous programmer or a group of programmers under an alias Satoshi Nakamoto introduced Bitcoin. Satoshi described it as a ‘peer-to-peer electronic cash system.’ It is completely decentralized, meaning there are no servers involved and no central controlling authority. The concept closely resembles peer-to-peer networks for file sharing.

One of the most important problems that any payment network has to solve is double-spending. It is a fraudulent technique of spending the same amount twice. The traditional solution was a trusted third party – a central server – that kept records of the balances and transactions. However, this method always entailed an authority basically in control of your funds and with all your personal details on hand.

Blockchain

In a decentralized network like Bitcoin, every single participant needs to do this job. This is done via the Blockchain – a public ledger of all transaction that ever happened within the network, available to everyone. Therefore, everyone in the network can see every account’s balance.

Every transaction is a file that consists of the sender’s and recipient’s public keys (wallet addresses) and the amount of coins transferred. The transaction also needs to be signed off by the sender with their private key. All of this is just basic cryptography. Eventually, the transaction is broadcasted in the network, but it needs to be confirmed first

Crypto – Puzzle

Within a cryptocurrency network, only – so called – miners can confirm transactions by solving a cryptographic puzzle. They take transactions, mark them as legitimate and spread them across the network. Afterwards, every node of the network adds it to its database. Once the transaction is confirmed it becomes unforgeable and irreversible and a miner receives a reward, plus the transaction fees.

Essentially, any cryptocurrency network is based on the absolute consensus of all the participants regarding the legitimacy of balances and transactions. If nodes of the network disagree on a single balance, the system would basically break. However, there are a lot of rules pre-built and programmed into the network that prevents this from happening.

Cryptocurrencies are so called because the consensus-keeping process is ensured with strong cryptography. This, along with aforementioned factors, makes third parties and blind trust as a concept completely redundant

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Cryptocurrencies

The world “Fiat Currencies” are old, outdated, not enough hard currency money supply and mismanaged by its current governments (Currency Wars) and now starting to cause social unrest;this is only the beginning. We are trying to get ahead  of the game preventing this very serious situation from happening avoiding that it gets really out of hand.

Between 2008 and 2013 happened a  global financial crisis, Central Banks experienced problems = major social disorder and unrest began to unfold. You do not want to even imagine a major case in point of social disorder and unrest generated by reasons related to financial and currency crises. Since 2008 cyrpto currencies are emerging and trying to make strides for a commomly accepted digital currency and  Digital Currency Management System (DCMS). Currently,  online merchants have been handicapped being held hostage by expensive credit card companies, high fees from escrow services, merchant service bankers blocking whole countries, as well as complicated payment software implementations and charge backs.

There are many advantages for online merchants to use crypto currencies:

• The monetization in new markets
• Lower transaction fees

Transactions are being confirmed instantly, they are secure and there are no charge backs.

Market Cap

With a total Market Cap of over $1 Billion and growing the Crypto Currency economy is reminiscent of other related protocols that allowed for explosive growth through distributed networks. The Crypto Currency protocol allows for a secure digital transaction to take place over the Internet, bypassing the need to trust any third party, therefore lowering overhead cost, and providing for instant delivery of digital product for digital coins in return. Crypto Currencies is a type of digital currency which relies on cryptography, usually alongside a proof-of-work scheme, in order to create and manage the currency.

Decentralized Network

A decentralized network of peer-to-peer computer nodes working in sync creates and verifies transactions of transfer of said currency within the network. Over the past few years Crypto Currencies have been shown as an Emerging Payment Systems. These new systems have been adopted by individuals and business wishing to transact quickly and efficiently over the internet without the need to supply Credit Cards or Banking information. By utilizing the characteristics of these currencies Merchants are able to setup an account and accept payments within minutes allowing customers from all over the world to purchase goods and services across borders. The nature of this currencies provide a built in mechanism where a Trust between Seller and Buyer can be established without the need for a third party to act as an escrow, therefore lowering the cost of transfer for the Buyer and risk of fraud for the Seller; as these transfers are irreversible. These CryptoCurrencies are not controlled by any central entity and are not subject to any local jurisdiction, and therefore are able to transact freely across borders without the need of any due diligence preformed by any entity in order to approve or reject anyone from using said CryptoCurrency.

E-Commerce

E-commerce sales topped $1 Trillion for the first time in 2012, and will continue to show double digit increase year over year for the next decade. But despite of this ever increasing industry the options for receiving and sending payment for goods and services purchased on line have not evolve to meet the needs of this global industry. A Merchant in Brazil wishing to accept payment for any goods or services rendered needs to establish a merchant account with a third party provider that will grant him/her. the ability to charge his customers. His customers must also register with the third part provider to obtain a way to pay for said products or services. Although services such as Visa, MasterCard and PayPal exist in the marketplace; they are not suitable for many Merchant or Buyer located anywhere in the world. As many Merchants and Consumers do not have established Banking systems in place and therefore do not qualify for a Credit Card or a PayPal account. The high cost and fraud associated with accepting payments via Credit Cards or PayPal online discourages many merchants and buyers from using these services. Crypto Currencies offer a secure low cost fast solution that provides an account to anyone, anywhere, anytime. A typical transaction of funds between two Crypto Currencies accounts cost less than $0.05 regardless of the amount being transferred. So if you decide to transfer $1,000.00 internationally via a Credit Card online to a Merchant, the cost to the Merchant will be approximately 3% or $30. PayPal will charge approximately 3.9% or $39. The cost through a Crypto Currency is still only $0.05 or less. And the funds transferred by a Crypto Currency account to the Merchant will not be subject to any chargeback or fraud.

The nature of Cryptocurrency?

Cryptocurrencies are physical precomputed files utilizing a public key / private key pairs generated around a specific encryption algorithm. The key assigns ownership of each key pair, or ‘coin,’ to the person who is in possession of the private key. These key pairs are stored in a file named ‘wallet.dat,’ which resides in a default hidden directory on the owners hard drive. The private keys are sent to users using dynamic wallet addresses generated by the users engaged in transactions. The destination payment address is the public key of the cryptocurrencykeypair. There is a finite amount of each cryptocoin available on the network, and value of each unit is assigned based on supply and demand, as well as the fluctuating difficulty levels required for mining each coin. The wallet.dat file is the most important file of the cryptocurrency software architecture, as that is where the physical cryptographic private key file is stored. Much like cash, if a user loses their wallet.dat file, or has it stolen, the cryptocurrency is lost. The decentralized nature of open source protocol ensures that the control of the network remains in the hands of the users. Transactions are dependent on participants in the network, and the user responsible for the security of their own finances and data, without the need for reliance on third parties such as banking institutions. Bitcoin operates as a p2p file sharing protocol, and therefore the concept is similar to .torrent technology. The p2p network relies on user participation for successful trusted data exchange. Each transaction is confirmed through key verification on multiple nodes in the network before reaching its destination. This crowdsourced key verification process guarantees the integrity of the data transfer. The most popular cryptocurrency at the time of writing is Bitcoin, with alternatives such as Litecoin rapidly gaining market traction. The source code for these programs, as well as the code for other cryptocurrencies, are available on all major open source code repositories.

Reminder: A cryptocurrency is a digital or virtual currency designed to work as a medium of exchange. It uses cryptography to secure and verify transactions as well as to control the creation of new units of a particular cryptocurrency. Essentially, cryptocurrencies are limited entries in a database that no one can change unless specific conditions are fulfilled.

(*) Source: The Guardian