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CRYPTOCURRENCIES – DIGITAL MONEY OR
MENANCE OF THE FUTURE?
payment network has to solve is to prevent the so-called double spending:
to prevent that one entity spends the same amount twice. Usually, this is
done by a central server which keeps record about the balances. In a
decentralized network, you don‘t have this server. So you need every
single entity of the network to do this job.
But how can these entities keep a consensus about these records?
If the peers of the network disagree about only one single, minor balance,
everything is broken. They need an absolute consensus. Usually, you take,
again, a central authority to declare the correct state of balances. But how
can you achieve consensus without a central authority? Nobody believed it
was even possible but Satoshi proved it was.
How miners create coins and confirm transactions
A cryptocurrency like Bitcoin consists of a network of peers. Every
peer has a record of the complete history of all transactions and thus
of the balance of every account.
[Picture source - https://blockgeeks.com ]
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