Why did cryptocurrencies appear?
Cryptocurrencies where created to address certain needs in the money market, that fiat currencies and traditional banks where not addressing. Cryptocurrency is nothing less than a reinvention of money. Money that you can validate yourself on a network without needing a bank. Cryptocurrencies address the inherent problem that financial institutions face today. Financial institutions suffer from inherent weakness of the trust based model. Completely non reversible transactions are not possible since financial institutions cannot avoid mediating disputes. Bitcoin attempts to solve this problem by tackling the byzantine general’s problem.
What is the Byzantine general problem?
The Byzantine general’s problem is the problem by communicating only by messenger, the generals must agree upon a common battle plan. However, one or more of them may be traitors who will try to confuse the others”. This is a classic problem that must be solved on the distributed computer system network, when it comes to the Bitcoin network there is no true general or server. All participants or nodes are exactly of equal hierarchy.
All participating node have to agree upon every message that is transmitted between the nodes. If a group of nodes is corrupt or the message they transmit is corrupt, this should not affect the network as a whole, as the network should resist this ‘Attack”. In short the network in its entirety has to agree upon every message transmitted in the network. This agreement is called a consensus.