Cryptocurrency Explained - All You Need to Know

"Cryptocurrencies are digital assets that are regulated and secured, based on cryptography, and recorded in a blockchain."

How Cryptocurrencies Work:- 

Developers use cryptography and protocols to encrypt sensitive data transfers in order to secure exchange. Individuals called “miners” leverage massive amounts of computing power in order to record and secure transactions. Miners are rewarded in transaction fees. Each transaction completed is recorded on the blockchain along with all past transactions, which validates ownership of all units of currency.

Advantages of Cryptocurrency:- 

Security: 

The defining feature of a cryptocurrency is the use of cryptography, which guarantees the security of the asset and makes it difficult to counterfeit. Once a cryptocurrency transfer has been authorized, it can’t be reversed as in the case of the “charge-back” transactions allowed by the credit card companies. This is a hedge against fraud which requires a specific agreement to be made between a buyer and seller regarding refunds in the event of a mistake or returns policy.

Decentralized: 

The decentralized nature of blockchain technology means that it doesn’t rely on a central point of control. A lack of a single authority makes the system fairer and considerably more secure. The way in which data is recorded onto a blockchain epitomizes its most revolutionary quality: its value of decentralization. Rather than relying on a central authority to securely transact with other users, blockchain utilizes innovative consensus protocols across a network of nodes, to validate transactions and record data in a manner that is incorruptible. As a blockchain is a ledger of information it is extremely important that the information being stored is honest and accurate.

Low fees: 

The miner fees involved in transactions are negligible compared to a third party payment processor of traditional fiat currency.

Borderless & Instantaneous Transactions:

International and domestic cryptocurrency transactions are treated the same and can be done instantaneously.

Key Terms

Wallet:

 Users have wallets to confirm temporary ownership of their units of cryptocurrency. Wallets can be stored on a cloud, hard drive, or other external storage devices. Wallets decrease the probability of theft with units of currency not being used.

ICO: 

An initial coin offering (ICO) takes place when a firm or start-up seeks to raise capital for a new cryptocurrency venture. Before this takes place, the firm issuing the ICO lays out the

goals and strategy of the cryptocurrency venture. During an ICO, investors and supporters purchase the cryptocurrency being raised for funds in hope of appreciation in value. In 2014, the Ethereum project launched an ICO that raised $18 million.

Exchange: 

The more popular cryptocurrencies (Bitcoin, Ripple, etc.) can be traded on a secondary exchange. These platforms allow users to exchange their fiat currency (USD, Euro, Yen). Exchanges play an important role in providing liquidity and defining value for cryptocurrencies.

Private Key: 

Private keys allow users to authenticate and allow them to participate in the blockchain network. Without a private key, users cannot exchange, send, or convert their

cryptocurrency. When you lose a private key it cannot be recovered.