We are going to explain what cryptocurrencies and wallets are. These are two essential concepts when it comes to understanding this type of electronic payments totally different from that of conventional currencies, and to which large companies such as Facebook itself have already joined with the launch of Libra.
In fact, Facebook has presented two different products, the Libra cryptocurrency and the Calibra wallet, hence if you are not familiar with this world you may not understand well what differences there may be between the two. That’s where we’re going to come in, trying to explain it to you in a simple way. What is a cryptocurrency
Cryptocurrencies, also called cryptocurrencies or cryptoassets, are a digital medium of exchange that uses cryptographic methods to secure your financial transactions, control the creation of new units, and verify the transfer of assets. They are therefore a decentralized alternative to digital currency, a method opposed to conventional currencies that are centralized and organized by entities and banks.
To understand them you have to understand several basic concepts. The first is that it is based on a decentralized network of computers, which means nodes spread around the world with copies of all the transactions that have been made. The second concept is that of miners, people who are part of the nodes, and who have the incentive that every time new Bitcoins are generated they are distributed among those who are part of these nodes.
Another important concept is that of exchanges, which are companies that allow you to exchange currencies such as euros or dollars for Bitcoins and get into the world more easily. When you get them, they are stored in the ‘Wallets’ or wallets, which are applications that allow you to save or exchange them.
Each cryptocurrency has its own algorithm, which is the one that manages the number of new units that are issued each year. For example, we have Bitcoin, which every four years reduces by two the amount that is produced, and only a total of 21 million Bitcoins will be issued. This is a fundamental difference from conventional currencies, since banks modify their value to their free will. This gives it more ability to generate value against currencies that can be devalued when banks say.
This decentralized computer network with different nodes is known as blockchain. Your blocks or nodes are linked and secured using cryptography. Each block binds to a previous block, as well as a date and transaction data, and by design is resistant to data modification.
Therefore, it is as if this network or blockchain is an open and public free in which all transactions made by two users are recorded. When you make a transaction, the data of this is recorded in a block, and it is automatically replicated in the rest. This means that the data cannot be modified or manipulated without modifying the rest of the blocks, something extremely complicated.
The first cryptocurrency was Bitcoin created by “Satoshi Nakamoto”, a pseudonym that corresponds to a person who no one knows exactly who he is. This person published in 2009 an article in which he described a P2P payment system that he called Bitcoin. After a few months he himself published the first version of the software that allows to manage the network of the currency, and begins to interact in forums with the first interested parties.
Since then, other cryptocurrencies have been created with greater or lesser luck. One of the most popular has been Ethereum, but now even large companies like Facebook are trying to tame this technology with their own alternatives.
Wallets, wallets or wallets are the tool with which users store and manage their cryptocurrencies. Therefore, cryptocurrencies are one thing and wallets are another. It’s like in real money, the currency is what you pay with and the wallet is where you keep the coins.
Wallets also store the public and private keys or addresses of each user. These keys are a fundamental part of the cryptocurrency exchange. To begin with, we have the public key, which is what makes it possible for other users to send cryptocurrencies to your wallet.
This key is encrypted so you don’t know who’s behind it, but it works similarly to personal addresses in PayPal and other tools. You give your public key, and the rest send the cryptocurrencies to that address so that they reach you directly.
Once the transaction is made, it is written to the blockchain using your private key, and is replicated throughout the computer network so that you can no longer modify it, since to do so you would have to modify the transaction on all computers. This makes the larger a cryptocurrency’s network the more secure its transactions are.
In short, your wallet is the one in which all the cryptocurrencies you have are stored, and the one that you can then use to send and receive the cryptocurrencies. Of course, keep in mind that if you forget the key of your wallet you will lose all the cryptocurrencies you have in it because you can not access them, so you better have it well targeted.