What is Cryptocurrency
Everything You Need to Know
crypto tech.
Cryptocurrency is the internet-based medium of exchange that uses cryptographical functions which conduct financial transactions. It leverages blockchain technology to gain decentralization, transparency, and immutability. It is not controlled by any central authority. Sent directly between two parties through private and public keys. Transfers may be done with minimal processing fees, allowing users to avoid the fees charged by traditional financial institutions. It has become a global phenomenon known to most people.
1. How Cryptocurrency Works
chains in blocks
Transactions are sent among peers by the use of software called Cryptocurrency wallets. The transactions made uses the public address to transfer balances from one account to another. To transfer funds, a private key associated with the account is needed. Transactions made between peers are encrypted and then broadcast to the cryptocurrency’s network and then queued up to be added to the public ledger. Transactions are then recorded on the public ledger through a process called mining. Users of a given Cryptocurrency have access to the ledger if they choose to access it, for example, by downloading and running a copy of the software called a full node wallet. The transaction amounts are public, but who sent the transaction is encrypted. Each transaction leads back to a unique set of keys. Whoever owns a set of keys, owns the amount of cryptocurrency associated with those keys. Many transactions are added to a ledger at once. These blocks of transactions are added sequentially by miners. The ledger and the technology behind this are called blockchain. It is a chain of blocks of transactions.
2. Blockchain and Cryptocurrency
bit coin
Blockchain brings out cryptocurrencies into play. The blockchain is the technology that serves as the distributed ledger which forms the network. This network creates the means for transacting, enabling the transfer of information and values.
Cryptocurrencies are the tokens used within these networks to send value and pay for these transactions. Furthermore, you can see them as a tool on a blockchain, in some cases serving as a resource or utility function. Other times they are used to digitize the value of an asset.
3. What is Cryptocurrency Mining?
mining
Cryptocurrency mining includes two functions, namely: adding transactions to the blockchain and releasing new currency Blocks put by miners should contain a proof-of-work.
A unique program and a computer is needed during mining, which helps miners compete with their peers in solving complex mathematical problems. This needs vast computer resources. In regular intervals, miners would attempt to solve a block having the transaction data using cryptographic hash functions.
Hash value is a numeric value of a certain length that especially identifies data. Miners use their computer to zero in on a hash value less than the target and whoever is the first to crack it would be considered as the one who mined the block and is eligible to get rewarded.
4. Properties of Cryptocurrency
Free Of Permission — Everybody can download the necessary software to mine, trade, and purchase things with cryptocurrencies.
Irreversible — Once you have sent money, the transaction is 100% irreversible. There is nobody on the face of the universe that has the power to reverse these transactions.
Highly Secure — Cryptocurrencies are governed by a security system known as cryptography. In other terms, each block, the ledger, transactions, and your private stash of crypto-funds are all guarded by highly sophisticated encryption.
Instantaneous — Cryptocurrency transfers happen immediately. This differs with banking transactions or credit card transactions which can take up to several days to be completed.
Anonymity — The final but not least property of Cryptocurrency is that they are totally anonymous and operate under the use of pseudonyms. Cryptocurrency accounts and transactions are not linked to real-world identities.
5. Monetary Properties of Cryptocurrency
No Debt — Cryptocurrencies are not created or monitored by any kind of centralized governing body, and they are not seen as debt.
A Controlled Supply — cryptocurrencies have a very specifically controlled supply. Cryptocurrencies like Bitcoin limit the supply of tokens that are available.
Final Thoughts
Understanding cryptocurrency is as simple as this. Following the points above, you will have knowledge that many don’t have. It is your great turn to take action.
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What is Crypto Currency: [Everything You Need to Know] was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.
