Cryptocurrencies are rapidly dominating the online financial transaction world. No matter where the money is used, cryptocurrencies are changing the way we view money. It has been less than a decade since it existed and since then, it has gained a market value which is around $170 billion. With this, more and more people are getting interested in it.
What is Cryptocurrency?
Cryptocurrency is a virtual or digital asset used as the medium of exchange which uses cryptography to secure financial transactions, to verify the transfer of assets and to control the creation of additional units. The strong cryptography that is used in cryptocurrency makes it hard for anyone to counterfeit it. Others take cryptocurrency as a digital, virtual or alternative currency which is used in different online activities like trading. Furthermore, it uses a decentralized control in as much as it is widely known for its organic nature which means that it is not controlled by any central authority like the government. This feature makes cryptocurrency different from the currencies in different parts of the world.
How Do Cryptocurrencies Work?
Cryptocurrency is an application secured with cryptography known as blockchain. Blockchain has the capacity to support several technologies including cryptocurrency. The existence of cryptocurrency would be impossible without blockchain.
What is a blockchain?
A block refers to the cryptographic technology based mathematical problem that is to be solved by the computer in order to complete the block. The block allows the users to modify information inside of it, which in return invalidates the data. In order to fix it, the incorrect draw has to be replaced with the correct one.
The creation of a new block creates a link of data from the previous block, thus the name blockchain. As the data gets older, it becomes more secure. Generally speaking, a block is valid when there are sufficient blocks added to the chain to make it more secured. Taking cryptocurrency into account, blockchain serves as the storage of immutable transaction ledger for the currency that is traded.
Mining refers to the process of solving mathematical problems by miners. The miners’ bundle transactions together, after which, they will solve the mathematical problem. At times, these mathematical problems are quite difficult, thus powerful or supercomputers are needed. Miners earn new coins or free transaction fees from solving these mathematical puzzles.
Furthermore, it is the miners’ responsibility to ensure that transactions made are valid by seeing into it that there are enough coins in a person’s account who is trying to make a transaction. Anyone can view the blockchain which means that anyone can view any transaction too. A trader can have as many wallets as he wants.
Is it secured?
The issue of cryptocurrency security has been debated for so long. Generally speaking, cryptocurrency makes use of a wide array of security measures in order to ensure that the network, as well as the people who use it, are safe.
Anyone who has a cryptocurrency wallet is given a private key in as much as an address is contained in his wallet which is used when transferring from one wallet to another. Transactions are completed only if signed in with the private key which means that a transaction is invalid even when the correct address is entered and the account key is incorrect. It is very important that you keep your private key by yourself, not unless you want all your money to be taken by someone else.
Compared to the use of credit and debit cards, cryptocurrencies are way safer and cheaper too.