Earn with cryptocurrency

 Description of what Bitcoin is in our lives


If you ask people around you if they have heard anything about Bitcoin, everyone will probably answer, "oh yes, of course". For several years now, cryptocurrencies have been driven by religious norms, someone is making a huge amount of money from them, and entire nations don't know how to treat the new technology.


Nevertheless, what is it, how does it work, and why is it all needed? How is it better than existing payment systems, and what do video cards have to do with it? This article is going to talk about this, and not only.


Table of contents

Basic idea


Advantages


Reliability


Cryptocurrency rate


Legal regulation


Main idea

Imagine two partners: Vasya and Kolya. Kolya likes to keep records of all his transactions and keeps a diary for this purpose. The diary is a set of consecutive records:


Borrowed 50 money from Sasha.


Borrowed 8 money from Peter.


Borrowed 100 money from Vasya


Gave 130 money to Masha


Borrowed 36 money from Roma


...


Such a way of doing business is very convenient - at any moment you can show the debtor the necessary record. And in addition you can see the entire history of money transactions.


At some point the cunning Vasya sneaks into Kolya's diary and replaces the entry "Borrowed 100 money for Vasya" with "Bought buckwheat for 100". And one day Kolya gets into the diary to show Vasya the record of his debt, but is surprised to find no corresponding line. The diary has been hacked. Kolya does not get his money.


To prevent this from happening again, Kolya complicates the entry. He opens his computer and finds the md5sum program, which turns any text into a fixed length character set. And it does it as unobviously as possible: if he changes even one letter in the encrypted text, the output character set will be completely different. It goes something like this:



Such a sequence is called a hash, and md5sum is a hash function.


To be sure, Kolya decides: "I'll throw a job to attackers: I'll hash both the text of the new entry and the hash of the previous one." That is, each new hash is now linked to the previous record! And where without an initial hash (any sequence of characters, for example da7c8) for the first line. Now the loan table looks like this:


Borrowed 50 money from Sasha 69ab8


Borrowed 8 money from Peter 27825


Borrowed 100 money from Vasya e709a


Borrowed 130 money from Masha fdb876


Borrowed 36 money from Roma bd3d7


...


In the first item "69ab8" - hash for the initial hash "da7c8" and the entry "Borrowed 50 money from Sasha".


In the second item "27825" is the hash for the freshly generated hash "69ab8" and the entry "Borrowed 8 money from Peter".


In the third, "e709a" is hash for the previous hash "27825" and the text of this line, "Borrowed 100 money for Vasya".


And so on in the same way.


Now Vasya will have to recalculate hashes for all next entries to change the third line to something else. Let's say, there are 5-10 entries ahead - it's tedious, but the goal is worth it. But if the number of records is much larger, then such machinations will be difficult.


Kolya does not stop there - there is no such thing as too much reliability. He adds a nonce to each entry in brackets, some number, due to which the hash necessarily ends with two zeros. The table turns into the following:


Borrowed 50 money from Sasha (210) 69a00


Borrowed 8 money from Petya (172) ff800


Borrowed 100 money from Vasa (654) e7f00


Borrowed 130 money from Masha (323) a6c00


Borrowed 36 money from Roma (901) bd300


...


In the first item "69a00" is the hash for the initial hash "da7c8" and the entry "Borrowed 50 money from Sasha".


In the second item "ff800" - hash for the freshly formed hash "69a00" and the entry "Borrowed 8 money from Peter".


In the third, "e7f00" is the hash for the previous hash "ff800" and the text of this line, "Borrowed 100 money for Vasya".


And so on.


Now there is no need to hide the diary, the whole history is public, but it is too difficult for hackers to change any entry in it. Kolya takes five friends as partners, with whom he shares his diary. For each new entry together they start to find the right nonce, it's faster. Whoever finds the cherished number first, enters the entry into the diary and receives a small reward. For the guesser to get the reward, the entry must end with "transfer X amount of money to user Y", where X is the reward for user Y for finding the chosen nonce.


The final form of Kolya's diary is Bitcoin. It is a payment system that uses the eponymous unit of the same name to account for transactions. A monetary transaction, the result of which is recorded in the diary, is a transaction. The sequence of entries in it (each called a block) in it is a blockchain. The process of Kolya's friends competing to find a suitable nonce is mining, and the participants themselves are miners. The fee for writing a block is the transaction fee.


Bitcoin is very similar to gold, which cannot be copied - it can only be mined. But this is a very costly process, both in terms of time and resources. This is one of the reasons why gold is so valuable. However, while gold mining involves humans, mining uses the processing power of the computers provided by the transactors. Roughly speaking, there is only one way to get more Bitcoins: by processing more transactions.


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