At their heart, cryptocurrencies are just fancy databases. Bitcoin, for example, is a big database of who owns what bitcoin, and what transactions were made between those owners. In its own way, that’s little different from a conventional bank, that is basically just a big database of who owns what pounds, and what transactions were made between those owners.
However the distinction with bitcoin is the fact that no central authority runs that big fancy database. Your bank can unilaterally edit its database to modify how much cash it thinks you might have, and it does so often. Sometimes that’s to your advantage (in case your debit card gets stolen and used, for instance, your bank will just return the amount of money) and often it’s not (in case your bank thinks you’re money laundering, it will freeze your money, potentially crippling your small business).
With bitcoin, no one can do either of the things. The only authority on the network is whatever the majority of bitcoin users concur with, and in practice which means nothing but the basic rules from the network are ever enforced.
Is that this all about crime?
This is a lot about crime. The flip side of cryptocurrencies being decentralised databases is the fact that for most people, most of the time, there’s no disadvantage in a centralised database. If you trust the financial system to hold your funds, or Dropbox to keep your files, or YouTube to host your videos, then you don’t want to use less efficient decentralised versions of the services.
But if you are intending to commit financial crime, store illegal downloads, or host pirated videos a decentralised version of those services becomes a lot more appealing. That’s why bitcoin, for instance, is considered the currency preferred by online drug dealers and cybercriminals demanding ransoms to restore hacked data.
“Crime” is really a broad term, though. In many countries, possessing a political opinion in contrast to that of the ruling regime is recognized as broadly criminal; much more limit the freedom of the citizens in such a way that citizens of liberal democraciesmight view as unethical and inhumane. If Cryptocurrency Exchange Design allow those limitations to get overcome, it might technically be promoting crime, but not in the way most cryptocurrency critics mean.
You continue saying “blockchain”. What does that really mean?
The thought of the blockchain lies at the heart of all cryptocurrencies. It is the decentralised historical record of modifications in the ownership of the asset, be it simply spending a bitcoin or executing a complex “smart contract” in one of the second-generation cryptocurrencies like Ethereum. Each time a cryptocurrency transaction occurs, its data is broadcast throughout the entire network from the spending party, ensuring that everyone has an updated record of ownership. Periodically, all rkabxo recent changes get bundled together into one “block”, and included in the historical record. So the “blockchain” – a linked list of all of the previous blocks – may serve as the complete and finished record of who owns what on the network.
What exactly do miners really do? – They build the blockchain. How precisely they actually do that differs from cryptocurrency to cryptocurrency, but bitcoin is an excellent example: every ten minutes roughly, one miner is semi-randomly selected to do the work of taking all the transactions they’ve heard about, declaring them confirmed and bundling them up into one block of transactions, that they then enhance the chain. In exchange for doing the job, the winning miner is additionally permitted to “print” some new bitcoin to pay for themselves a reward in bitcoin, currently worth about $140,000.
Anyone can be a miner – all you have to do is run the bitcoin software in mining mode. The tricky part will be a profitable miner. The specific work of bundling the transactions together is simple, however the real expense comes from just how the winner is selected. Consider it as a raffle, where investing in a ticket involves making use of your computer to fix a really complex, but ultimately useless, arithmetic problem. To be in with the most chance of getting that $140,000 reward, you should solve those problems thousands or countless times an additional to get into the raffle with as numerous tickets as possible, and that means building specialised computers, negotiating cheaper sources of electricity, or perhaps hacking innocent people and ultizing their hardware for nothing instead.