21st century’s money for the future. Digital money is known as bitcoin. Cryptocurrency is an internet-based online medium of exchange that uses cryptographical functions to conduct financial commerce. Cryptocurrencies influence blockchain technology to increase decentralization, transparency & immutability.
The essential feature of a cryptocurrency is that any central authority does not control it; its decentralized nature is what it helps in making it different from the old government control system.
Cryptocurrency can be sent directly between two parties with the use of private and public keys. These transfers can be done with the smallest processing fees, allowing the users to avoid the fees charged by traditional financial sectors.
After even knowing cryptography, bitcoin is still not been understood by many; it is a big confusion under the scientist, developers, consultancy, and even bankers.
So let us understand the basics of cryptocurrency:
How Does Cryptocurrency Work?
Satoshi Nakamoto, an unknown bitcoin inventor, was trying to invent a decentralized digital cash system. He wanted to access cash by a peer to peer or file-sharing networks. To get to know how it is accessed, you first need to have a payment network with accounts, balances, and transactions; this solves the double-spending money problem into one entity that spends the same amount twice.
In a decentralized network, you don’t need this server. So it would help if you had every single entity of the network to do this job. Every peer in the system needs to have a list with all transactions to check if future transactions are valid or just an attempt to double spend. Unless the peers of the network disagree about only one single, slight balance, everything is broken.
As we have the real money with us, suppose they are one entity entered in database systems. One real money, one database entity entered.
How Minors Confirm The Transaction And Create Coins?
A cryptocurrency like – Bitcoin consists of a network of peers. Every peer has a record of a complete history of all transactions; therefore, the balance of every account.
A transaction is a file that says, “Jack gives X Bitcoin to Alice “and is signed by Jack’s private key. It’s basic public key cryptography; After signed, a transaction is broadcasted in the network, sent from one peer to every other peer. This is basic p2p-technology. When a transaction is confirmed, it stays saved in the memory of the system. It can’t be reversed once the order is completed, it is part of an inflexible record of historical transactions: of the so-called blockchain. Only miners can confirm purchases. They do transactions, stamp them as legit, and spread them in the network.
Who Are Miners?
However, everyone can be a miner. Because a decentralized network has no authority to authorize this task, a cryptocurrency needs some means to prevent one governing party from abusing it.
People, you get to know how when and from where cryptocurrency works, then it is best for them to invest and take the risk and enjoy the digital money.