What is Cryptocurrency, how does it work?

Cryptocurrency is an electronic currency or coin which has cryptographic level security. This security makes it virtually impossible to copy, clone or counterfeit the currency. A record of coin ownership is stored in a database called a ledger and secured as above to control the creation of new coins and to authenticate the transfer of coin ownership.

This type of currency is defined by the fact that they are largely not issued by a centralised authority. This means that Government interference in transactions is almost impossible.

The first blockchain-based cryptocurrency was Bitcoin. Created in 2009 by developer Satoshi Nakamoto, presumed to be working under a pseudonym. Namecoin followed in 2011 with Litecoin and Peercoin close behind.

Still the most recognisable and most valuable, Bitcoin was the poster boy for crypto. There are now over 7000 cryptocurrencies with various functions and specifications. Some are clones of Bitcoin, but some are entirely new currencies that were built from scratch.

How Does Cryptocurrency Work?

Each cryptocurrency coin has to be validated. This validity check is made possible by blockchain. A blockchain is an endless list of records, named blocks, which are chained together and made secure by cryptography.

A timestamp and transaction data are contained within each block with a link back to the previous block. These blockchains are commonly managed by decentralised peer-to-peer networks and are secure by design.

Cryptocurrency Mining

Within cryptocurrency, mining is the way in which transactions are verified and then added to the blockchain digital ledger.

Each time a transaction is made using cryptocurrency a crypto miner is pledged to ensuring the information is authenticated and updates the blockchain with that transaction.

Miners compete against each other to solve mathematical problems with the first miner to solve the problem being able to authorise the transaction and in turn earning a small cryptocurrency commission payment.

Why Cryptocurrency Is The Future

Cryptocurrency is an ecosystem of its own, intruding on traditional finance’s patch with each passing day.

The number of people using Bitcoin and the number transactions those people are making has grown by an average of 60% every year since 2015.

Decentralised finance or DeFi is an alternative financial system built on public blockchain. Transactions made using this system are publicly visible and provide greater access as anyone can connect to them.

Once limited to a handful of early adopters, almost all traditional institutions are now involved in using cryptocurrency including Governments, banks, tech, institutional investors and exchanges.

As this new form of currency grows in popularity, crypto currencies are transforming finance as we know it and driving innovation like never before in privacy, efficiencies, security and access to finance.

Crypto is not just here to stay, it is the very future of finance.

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Source- Dacxi.com