Virtual digital currencies and how they are dealt with

In this evolving era, many of you often hear the words Crypto? Which is cryptography, Crypto or commonly known as Cryptocurrency is a virtual currency secured by cryptography. Since 2013, cryptocurrencies have begun to gain the attention of the global community and control virtual digital currencies. Many media outlets have started reporting on this digital currency. However, the existence of cryptocurrencies has its pros and cons.

As of February 2020, 10 countries hold significant amounts of cryptocurrencies and Nigeria holds the position with 34 percent followed by Vietnam and the Philippines with 21 percent and 20 percent respectively. So, what exactly is encryption and why is it so popular with the public?

Then how does it work?

Contents of the topic Toggle Understanding what is cryptography The development of Cryptocurrency Virtual digital currencies and how they are dealt with How traditional currencies work The decentralized system works using a ledger The computing power used by Google Understanding what cryptography is In simple terms, it can be said that virtual digital currencies are completely digital money, Crypto or Cryptocurrency is a digital currency secured by cryptography so that it becomes almost impossible to counterfeit this digital currency. The word “cryptocurrency” itself comes from a combination of two words, namely “crypto” which means secret code, and “currency” which means currency. The concept of encryption is already known since the days of World War II. At that time, Germany used encryption to send secret codes so that the other party could not read them easily.

Unlike the case of traditional currencies, which are centralized, cryptocurrencies are decentralized. There is no party present and acting as an intermediary in the transaction. Payments in digital currency are made from sender to recipient or peer-to-peer. However, all transactions made are still recorded and monitored in the cryptocurrency network system. The job of cryptocurrency miners is to record these transactions and earn commissions in the form of digital money that can be used.

Development of Cryptocurrency What is encryption or virtual digital currencies that was initially proposed The initial concept of cryptocurrency arose in the 1980s, in reference to Money Crashers At that time, an American computer scientist and mathematician named David Chaum invented a special algorithm that later became the basis for modern website encryption and electronic currency transfer today. David Chaum then developed his invention into the 1990s and gave birth to a digital currency called DigiCash. However, this innovation failed to develop. However, David's invention played an important role in the further development of cryptocurrencies.

Twelve years later, a trusted software engineer named Wei Dai created b-money. Upon the launch of The Balance, b-money had a more modern and complex concept and system than DigiCash. However, b-money failed to develop and never had the opportunity to be used as a medium of exchange. Entering the late 1990s and early 2000s, a traditional and well-known digital financial intermediary emerged, PayPal. PayPal itself was founded by Elon Musk and is the proof of payment for many online transactions. Virtual digital currencies and how they are dealt with The matter did not stop there for virtual digital currencies, the development of cryptocurrencies began to reach a bright spot in 2008. Since 2010, the price of cryptocurrencies has begun to rise significantly.

This is what makes many people mine cryptocurrencies that are traded in limited quantities. However, the price has decreased in recent years due to government regulations and legal protection. In Indonesia itself, crypto money is still not considered a legal tender or transaction. Bitcoin is a digital currency called cryptocurrency. There are thousands of digital currencies and they are growing every day. Bitcoin is a currency technology that was first created and therefore other digital currencies created after it are called altcoins (altcoins or alternative coins) These digital currencies are in the thousands.

Then what about OVO, GoPay, Dana and other digital financial services we often use today? Does it include digital currency? The answer is no OVO, GoPay et al are digital wallet services.

It is still the rupee currency, but it is stored in the digital wallet to facilitate transacting on online shopping platforms. Meanwhile, Bitcoin has its own digital wallet called a Bitcoin wallet. How traditional currencies work Before continuing to learn more about virtual digital currencies, let us first learn how traditional currencies work, such as the rupee. All transactions that use the rupee, whether using a credit card, debit card, or direct cash payment, are all centralized transactions. This means that all transactions related to the rupee are controlled by, for example, the value of the rupee itself.

The value of the rupee always rises and falls according to the market while still under the control of the state so that it is never too low or too high. When we transact in rupees, we have to hand over the money to this transaction manager called centralization. With the control of the parties managing it, the transactions tend to be more secure. However, this system has a side effect, which is that we have no control over the money that we have. For example, when we make a transaction through a bank, we hand over money to the bank, we don't know how they manage it, we only get an account with a total balance, and we don't know whether our money really exists or not.

Bitcoin and other cryptocurrencies offer a different transaction system, which is a centralized one. Read also: How much is the trading volume in the Forex market? When we deposit money in the bank, our account and password are managed by the bank, so that when we forget our password, we can contact the bank. This system has a weak point, especially if a hacker is able to hack into a banking system, then he can access all accounts. Unlike Bitcoin, when we enter the Bitcoin network, we will get a wallet address and password.

Only we know this address and password and we must register it and save it for ourselves because it appears only once in a lifetime and cannot be changed if we forget, our cryptocurrency cannot be used. This is what makes cryptocurrencies more secure. A decentralized system works using a ledger A ledger is a notebook whose contents record all transactions that have taken place The ledger is responsible for recording and viewing the transaction, not controlling the course of the transaction. Cryptocurrency consists of two words, which are virtual digital currencies and currency. The word cryptography is taken from cryptography, which is a system that protects information or communications by providing a code as a key and it can only be opened by people who know the key.

In cryptocurrency transactions, each person transacting has two keys, namely the private key and the public key. These two keys when used together can form a digital signature. This digital signature can be proof that we are the rightful owner but this method is not secure enough, this is where the ledger works. The ledger will act as a witness as well as verify that the transaction is legal.

The witness and transaction verification mechanism is implemented by completing mathematical calculations. The larger the cryptocurrency network, the greater the number of mathematical operations that must be completed, and the greater the computing power required. As of April 2021, Bitcoin's network security system is already massive at over 170 Exahashes per second and even the much smaller Ethereum altcoin has reached 550 Exahashes per second. The computing power used by Google This number is much greater than the computing power used by Google To get this amount of computing power, virtual digital currencies do not use a supercomputer but a peer-to-peer network system.

Peer-to-peer networks combine several humble computers to replace a supercomputer. This peer computer is a computer owned by miners and multi-miners from all over the world. We mentioned earlier that the digital signature alone is not secure enough, it still needs to be combined again with the description and history, then a transaction block will be formed.

This transaction block will be distributed to all miners as witnesses to the transactions. For example, if a transaction involves 10 miners, one block will be split into 10 miners. These miners are tasked with completing mathematical calculations to verify that the contents of the blocks match. This is where the security of cryptocurrencies lies if there is a hacker trying to trigger a transaction, he has to hack all the blocks in 10 miners at once, and less than 1 who fails to hack the block will be canceled immediately.

Once the ten miners agree that the block is valid, the transaction will continue and the newly completed block will be merged with the previous blocks after which a new block will emerge for further processing. This system of interconnected blocks is called blockchain. #Virtual digital currencies