—----------------------------------------------------------------------------------------------------------------------Section 5: The Internet and its Uses

Lesson 4 : Digital Currencies

Digital Currency - Any currency which is recorded and transferred on computers

They have been accepted as a form of payment for goods and services. As with traditional cahs digital currencies can be transferred between different accounts without physically moving any cash around. This has been made possible by : 

• Online Banking

• Banking apps

• Smartphone payments such as apple pay

Even though these currencies are online they can be converted into physical cash when needed.

Crypto currencies are a digital currency in the form of decentralised digital currency. They are not accepted as much as traditional currencies but are becoming used more with shops, businesses and manufacturers.

Digital currencies rely on the central banking system. This works by money going from you to your bank to a central bank to the other person's bank then to them. The problem is its centralisation and can make it easier to intercept and poses a risk of confidentiality and security.

Crypto currencies go from your crypto currency wallet to the others crypto currency wallet. Cryptocurrency uses cryptography to track transactions. They have none of the issues of centralised currencies. All transactions are publicly available and therefore all transactions can be tracked but they can also cause a crash in the market.

Crypto currency is secure because it uses BlockChain. In its most basic form blockchain is a digital ledger. A traditional ledger is a book or collection of accounts in which transactions are recorded, so a digital ledger is a timestamped series of records which cannot be altered.

WHenever a new transaction takes place all the networked computers get a copy of the transaction. It cannot be changed without consent of all network members. They are used in : 

• Politics 

• Education 

• Pharmaceutical 

Each block in a block chain contains 1000’s of  transactions. When new collections of transactions are packed into a block they are given a new hash value. This is unique and includes a timestamp which identifies when the event took place. This process of creating and adding a new block to the block chain is mining. Once it has been added it can't be removed or altered. To change any mistakes it must be reversed and added as part of a new block.

Block 1 is known as the genesis block. When you change something you have to change all the blocks that come after it as they are now invalid as they have the wrong previous block no.

Block chains are distributed meaning every person on the network receives a copy of the blockchain. When a new block is created a copy is sent to everyone on the network for verification. This helps maintain the integrity and trustworthiness of the data.