The Basics of Cryptocurrency

Cryptocurrency is a digital payment system that does not depend on banks to verify transactions.  It is a peer-to-peer system that allows anyone to send and receive payments anywhere.  Rather than being physical money that is moved and exchanged in the real world, cryptocurrency payments exist simply as digital entries in an online database describing specific transactions.  When you transfer funds in cryptocurrencies, the transactions are recorded on a public ledger.  Store your cryptocurrency in a digital wallet.

The world of cryptocurrencies made its first major debut with bitcoin, which is credited as the first successful currency of its kind.  It was described as a peer-to-peer electronic cash system, promising to fully decentralize and cut out any kind of middle man.  As bitcoin's popularity grew, other cryptocurrencies also hit the market, giving potential investors access to more options each year.

How Did Cryptocurrencies Become Popular?

While safety and security was a definite selling point with online transactions, the investment possibilities garnered public attention.  For those who were unable to take advantage of traditional banking products, easy access to online cryptocurrency provided another form of investment for this group of people.

How does cryptocurrency work?

Cryptocurrency is founded on the idea of ​​decentralization.  Unlike most payment options to date, the cryptocurrency does not have a general requirement of intermediaries, that is, the banking system.  This intermediary system has been integral to maintaining the integrity of our monetary system.

Banks, especially when it comes to digital transactions like stocks and non-cash transactions, help validate transactions.  This is particularly useful to prevent "double spending" in which transactions are repeated, mainly by mistake or in the case of piracy.  However, Bitcoin claims that the blockchain system is more secure than any banking system, processes transactions faster than any bank dreams of, and returns the transaction to the person who has the money.

To understand how cryptocurrency works, a good place to start is bitcoin, the most widely used cryptocurrency.

As mentioned above, bitcoin-like cryptocurrency is transferred from one user's wallet to another user's wallet.  There is no third party authority, such as a bank, that supervises, assists or manages the exchange.

Once you have installed your digital wallet from a site like Binance, Wazirx, Coinbase, you can create an address.  You can then give this address to the people you plan to transact with.

After a transaction, other users, known as miners, verify it on the public ledger.  Miners verify each transaction by solving a mathematical problem associated with the exchange.  When the problem is resolved, the transaction is verified.  Verified transactions are recorded in blocks on the blockchain, creating a public ledger.  A block has many transactions similar to a page of records.

Miners involved in transaction verification receive bitcoin rewards for their efforts.  In addition to these rewards, miners can also keep the transaction fees paid on the exchange.

Encryption in cryptocurrency

Encrypted systems translate data into a code that is secure and can only be read by a few people who have a key to decode it.

The process of converting this information into a secret code is known as cryptography.  This method is applied in every cryptocurrency exchange and is necessary to ensure that the transaction is secure, anonymous and never controlled by a central authority.