What Is Cryptocurrency And How It Works?

What Is Cryptocurrency And How It Works?

Cryptocurrency is a digital medium of exchange over the internet. This is also considered ‘The Future Money’. Cryptocurrency is a virtual currency transferred among peers and approved in a public digital ledger, no middlemen are involved there. The process is completely run on an online monetary platform. The transactions are not tracked by any single entity there. It is regulated by groups of people in a blockchain to approve the transaction. Cryptocurrency is sent between parties directly on the network. Everyone on the network can verify the transaction.

Bitcoin was the first decentralized (controlled by users on the network and computer algorithm) currency introduced in 2009. Later on many other cryptocurrencies (alternatives of Bitcoin known as “altcoins”) have been created.

How does it work?

It is an online medium of exchange works just like a bank’s credit or debit card. Transactions are created in a digital cryptocurrency wallet. A cryptocurrency wallet is a secure wallet to send, receive and store money or in other words you can move the funds in a blockchain.  The person, who is sending the currency to another user, uses a public address for the transfer of funds. A private key is also required for the person which is associated with the account. Transactions are then encrypted to broadcast in the cryptocurrency network and then queued in the public ledger for verification. The procedure through which these transactions are recorded in the public ledger is known as mining. All the transactions are public and the identity of the sender is hidden. All users have access to the ledger if they wanted to. Transactions on the network are associated with unique keys and whoever owns that set of keys, have the number of coins associated with those keys.

This is the process of trading Bitcoin however other currencies like Altcoins uses some other unique way.

How does cryptocurrency work

The blockchain work

The cryptocurrency blockchain is a public ledger, where all the transactions are validated by the owners, or group of people on the network. They are also known as data miners. The blockchain is a list of records known as blocks; they are linked and secured by cryptography. Each block in the chain is connected to the previous block by a link. Once the data is recorded in the blockchain cannot be changed or deleted. Blockchain helps the peers to solve the problem of double-spending.

block chain process

What is mining?

Mining is the confirmation process of transactions. Only miners can confirm the fund’s transfer. We can say that cryptocurrency is all about confirmation. They solve the puzzles over the software; therefore the transaction is added in the public ledger. On account of these miners receives coin as a reward after proof of their work. Mining is open-source; therefore every miner on the network can confirm the mobility of funds.

mining cryptocurrency

The future Money

Cryptocurrency is considered as the future money by many people, but the fact is that right now it is in its initial stage. Therefore it’s too early to assume it as The Future Money. The main aim behind the creation of this money is to remove intermediaries or middlemen for example financial institutions and banks. Cryptocurrency is considered as the secure mode of saving money, where currency coins are stored in a computer using special algorithms.

So what’s your take on cryptocurrency is the future of money?

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