The crypto game has long been part of the startup and trading bubble. In doing so, all actors throw around the wildest terms. And if you don’t want to be an absolute idiot, you can simply adopt these terms without any idea what blockchain and Co. mean at all.
So that you do not have to come out as a crypto layman at conferences and business meetings in the future, we explain the most important facts. For this, we asked Cryptex the most important questions about the crypto world. Here are the answers:
Bitcoin was first introduced by Satoshi Nakamoto in 2008 on a mailing list for cryptography specialists. However, Satoshi Nakamoto is only a pseudonym, because the true identity is still unknown today.
So it does not necessarily have to be one person, but it could also be a group of several people. Over time, there has been much speculation about who Satoshi Nakamoto might be. There were claims by computer scientist Craig Wright that he was Satoshi Nakamoto. The identity has not yet been proven. Satoshi Nakamoto sent his last email in April 2011 in which he says that he is now devdicating himself to other projects.
The idea of Bitcoin was first presented in October 2008 in a so-called white paper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System”. The white paper specifies how Bitcoin works in an abstract way. In January 2009, Satoshi Nakamoto released the first reference implementation of Bitcoin as open source software.
One can think of the blockchain as a huge, public and distributed cash book, which is able to store financial transactions. If someone wants to send Bitcoin from one person to another, then a transaction, a new entry in this cash book, is generated and, to put it simply, published in the blockchain. Such transactions are not stored individually, but grouped into blocks.
Now it is important to understand that not everyone can simply add blocks of transactions to the blockchain, because only the so-called “miners” are allowed to do that. “Miners” are special participants of the network who group transactions into blocks and if they manage to solve a mathematical puzzle, the so-called Proof of Work (PoW for short), they are allowed to add this block to the blockchain.
The main function of Bitcoin was initially to map financial transactions between two participants without a central server. In this way, uncensable and pseudo-anonymous transactions can be realized. Over time, more cryptocurrencies have established themselves that have even more features:
Ethereum, for example, can store and execute program codes (so-called smart contracts) in the blockchain in addition to transactions. This capability turns the Ethereum blockchain into a giant computer.
The ZCash blockchain, for example, focuses on anonymous transactions in order to maximize data protection for its users.
There are several other crypto currencies and not all of them are revolutionary, for example, the Dogecoin is in principle a fork of Litecoin, which in turn is very much based on the Bitcoin. However, further research is constantly being carried out and new areas of application are being developed.
Are you interested in the advantages of Bitcoin over standard currencies and how the value of Bitcoins is formed at all? You can read this next week in the second part of our “Crypto for Dummies” series.