Back to the list

Blockchain and cryptocurrencies: a quick tutorial

17 August 2017 12:50, UTC
The Internet is an evolving place in many ways. In matters of financial management, there are their own trends in the transition to a virtual space. More recently, the media began to mention so-called cryptocurrencies and digital technologies for creating "new" virtual money. In order not to miss the moment when the future comes, learn about these phenomena.

What is blockchain in common understanding

Blockchain literally can be understood as a “chain of transactions”. In case of financial terminology, the blockchain determines the technology of conducting operations in such a way that each of them is recorded in the system as a new fact, but with an automatic set of digital information about the entire chain.

If we speak about blockchain “for dummies” – it can be compared with human DNA, one molecule of which contains information about the body as a whole. Unauthorized changes to the data are not possible – the system will reject any attempts to conduct the operation. The blockchain is therefore recognized as a safe and affordable means of protecting financial data from intruders.

Security is provided by:

  • the mathematical algorithm in principle;

  • cryptographic protection mechanism;

  • five thousand computers system that relocates data among them.

A global attack is possible, but it won’t cover the cost of doing such a hack. Technology that provides safe storage of information about financial transactions, legal obligations, rights, is securely protected, although it isn’t hidden. But there’s no need to conceal the data — any attempt to use them for corrupt purposes will lead to colossal costs.

What is cryptocurrency in common understanding

Due to the described development of Internet technologies, the use of the term "blockchain" is increasingly associated with the concept of "cryptocurrency". It is a virtual means of payment, exchange etc. The unit of the cryptocurrency mostly is called a "coin".

The ancestor of the cryptocurrency is bitcoin, which was first mentioned in the pages of the economic journal in 2011. Lightcoin, z-cash, dash and other currencies also received the distribution.

The blockchain is used just to write operations related to cryptocurrency. This ensures absolute transparency — all operations performed from the very beginning of the system appearance are available.

Crypto-currency advantages:

  • open algorithm code makes mining available to many users;

  • anonymity of transactions doesn’t endanger the owner;

  • lack of control over issuance and accounting, exchange and transactions;

  • no threat of forgery or theft.

Forgery of cryptocurrency is impossible because of the very essence of this phenomenon. This is a set of encrypted data. Cryptocurrency is not similar to "electronic money". So the money appears in WebMoney just when they are sent to your e-purse. To get coins all you need is a virtual space on the Internet, not connection with any of the world's existing currencies.

Future of blockchain and cryptocurrencies

There is a certain opinion that the blockchain contributes to the development of trade on the black market, just because of its anonymity. At the same time, banking conglomerates led by leading financial and credit organizations of America and Europe study the technology and learn to use it in order to replace the SWIFT system of interbank transfers. However, the contradictoriness of opinions is also fueled by the ever-increasing interest around cryptocurrencies, which are not backed by anything real and are outside the areas of state control.