What is Cryptocurrency? How it works?
Can you think of currencies without any bank? What would happen no one knows except you how much money you have in your bank account, even if not the bank.
Is it really possible?
This thing is possible in cryptocurrencies. It is a decentralized market where your money in your wallet is safe from others within the blockchain network.
How is it possible to hold money by not knowing others?
In this following section, we will cover everything you need to know about cryptocurrency regarding how it is, how it forms and how you can use it.
Before that, we should have a little knowledge about the blockchain technology that is behind the innovative currency system.
What is Blockchain?
As the name Blockchain means the chain of blocks. Here the main part of the blockchain is something like information that is passed through one block to another block. These blocks are created serially and there is no way to change them.
For example, you have money in your wallet and the address of your wallet is “huihfw98ryw39ry3w8r8309ruq309rfweiofh”. Now if someone sends money to your wallet you have to open it and see. But when you try to open the wallet you have to solve an equation. If you cannot solve the equation the wallet will not open. The solution is a complex calculation where the ultimate answers come with a weird number and words like this “iehfosehr3yr793r983qrwq0ru3w09hfe”. The solving process was done by miners who usually use CPU and GPU to mine new blocks.
So, your money is safe in your wallet until the answer, or the Private key is unknown by others. Besides, there is no way to steal money from your wallet and take it out of the system. Every wallet is part of the blockchain system and if you alter any blocks the whole process will collapse, which is impossible to happen.
Now, you understand how much safety blockchain provides to your money. There is no way to let other people know how much money you hold until you personally disclose it.
What is Cryptocurrency?
A cryptocurrency is a digital form of money that is run within blockchain technology. In this currency system, the money is held by the blockchain system where no one has the ability to alter any information.
When you transfer cryptocurrency from your wallet to another persons’ wallet it will directly go from your wallet without any mediator. In that case, it will reduce time as you don’t have to wait for bank confirmation or checks or credit cards.
Moreover, there are other forms of cryptocurrencies known as altcoin or alternative coin.
What is Altcoin?
The altcoin is a cryptocurrency but the major difference between the altcoin and traditional cryptocurrency is that the altcoin is backed by fiat currency.
For example, if a company wants to release 500 coins with a value of $1 each, the overall value of the system will be $500. Therefore, the company should invest $500 in a bank to release the coin.
Nowadays the cryptocurrencies have become hype among investors as there is no expert like central banks to control them.
What is Bitcoin?
When we talk about cryptocurrency the first name that comes to our mind is “Bitcoin”. In 2010, a person named Satoshi Nakamoto created Bitcoin, which is known as a cryptocurrency or a virtual currency.
It is like an online version of cash where you can use this money e in buying and selling anything. If you are familiar with the electronic payment system where people invest money in their credit card or online wallet and make payments, you would know how Bitcoin works.
Bitcoin is a reward that miners get once they complete making blocks with the blockchain system. Once a new block is created, the blockchain expands and investors can take a part in the system using Bitcoin.
However, there is no physical existence of Bitcoin. If you say any picture of Bitcoin with the golden cover you would consider it as a novelty.
Is Bitcoin Secure?
Every transaction in Bitcoin is published in a public ledger where everyone can see both buyers and sellers between addresses. However, it is often difficult to track the person who is behind the Bitcoin public addresses.
As a result, there is a possibility of misuse of money through the Bitcoin system. On the other hand, if you want some money you have control over it and it is your choice how you will use this concept.
There is no way to track how much Bitcoin you have in your wallet unless someone gets access to your wallet using the private key. Therefore Bitcoin is considered the safest method of storing money.
If someone has 100 Bitcoin in his wallet and dies without letting others know the private key to others, there is no possibility of getting the money back from the blockchain system.
Sounds strange right?
This is how Bitcoin is secure but it is often a threat to the central economic system where banks work as a mediator to make any transaction And hold money.
Let’s summarise what we have learnt from the crypto market:
- The main part of the blockchain is something like information that is passed through one block to another block.
- A cryptocurrency is a digital form of money that is run within blockchain technology. In this currency system.
- Bitcoin is like an online version of cash where you can use this money e in buying and selling anything.