A cryptocurrency is a digital currency that can be used to exchange funds between members of a group. Cryptography is a security tool that can be used to control the creation and transfer of crypto assets.
It is becoming more popular to use cryptocurrency as a currency, for electronic payment systems, or for commodities. While Bitcoin is the most well-known cryptocurrency, other cryptocurrencies like Litecoin are gaining popularity, and increasing in value.
What is the process?
Every cryptocurrency has a public ledger that records the ownership and history of each coin. When a cryptocurrency owner wishes to sell cryptocurrency they inform the network.
The network uses computational power to verify the transaction (that you have the cryptocurrency you wish to spend, and that it has never been spent before), and then adds it the ledger.
The community members who assisted in the transaction are rewarded for their computational effort and power. This is called’mining’.
Other popular crypto currencies include Ripple and Litecoin.
These are the basic concepts of cryptocurrency you should know to understand the process.
All confirmed transactions using cryptographic techniques are kept in a public ledger to verify and record the identity of the owners and confirm the legitimacy of every cryptocurrency transaction.
The ledger allows you to see the spendable balances of your digital wallets. Every transaction is checked to make sure that the coins used are authentic. The ‘Transaction Block Chain,’ the public ledger for Bitcoin, is also known.
A transaction is the transfer of funds between digital wallets. Transactions are transactions that are submitted to the public ledger. Mining (confirming transactions and adding them into the ledger) can take time (up to 10 mins for Bitcoin).
To confirm a transaction and add it into the public ledger, a’miner’ must solve complex computation problems, similar to a puzzle. This process is open-source, and accessible to all.
The block of transactions is added to the ledger by the first person who solves the problem. Blocks, transactions, and public blockchains all work together to stop individuals from adding or changing blocks at will. Once a block transaction is entered into the ledger, all transactions associated with it are permanent.
Miner’s wallets will be credited with new coins and a small transaction charge. A ‘proof-of-work-system’ is what gives digital coins their value.
Cryptographic systems are used to verify transactions and create new coins. Cryptocurrencies are open-source, code-controlled, and depend on peer-to–peer networks. This is in contrast to traditional currencies that are controlled and regulated by governments. A single entity cannot influence the creation of digital currency.
What is digital currency?
Once you have a basic understanding of cryptocurrency, it is possible to decide whether you are interested in learning more or if you wish to trade or buy.