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What is Cryptocurrency and How Does it Work?

What is Cryptocurrency?

When do we talk about digital currency, the question that comes to our mind that what is cryptocurrency? Cryptocurrency builds on a decentralized electronic ledger. Moreover, it is a digital currency.

It is highly secure through cryptography. The technique used to solve the mathematical puzzle to verify the transactional data over the network.

What is p2p in Blockchain?

p2p in Blockchain

The most prominent feature of cryptocurrency is peer-to-peer (p2p)technology. Moreover, it uses to facilitate payment over the blockchain network without the involvement of any bank or third party.

Can We Pay Cryptocurrency Through Bank?

Bank

Cryptocurrency is not considered legal tender. It means digital currency can’t pay for debt payment in the country by the government or Central Bank. However, it can use as making a payment over the internet. Because of decentralized technology that allows users to access it worldwide.

Which is the First Digital Currency?

First Digital Currency

Bitcoin is the first digital currency; an anonymous developer Satoshi Nakamoto introduced it in 2009. With the evolution of the first virtual currency. So far 5786 digital currencies reported on the Coinmarketcap. Moreover, this number continues to rise.

Who Introduced Bitcoin?

Satoshi Nakamoto introduced cryptocurrency. A virtual currency at that time when the world had experienced severe shock waves of the 2008 global financial crisis.

Financial Crisis of 2007-2008

In 2008, many giant groups and businesses collapsed in the world. Economic downturn widespread followed massive unemployment. During that, people lost their confidence in paper currency.

In this scenario, an anonymous developer introduced a virtual currency. The borderless currency runs on the electronic decentralized ledger. However, it initiates fast transactions without the involvement of any bank, financial institutions, or third party.

This digital currency appeared to restore the confidence of the world as an alternative option to fiat currency.

How much is the Profit in Crypto Trading?

Crypto traders are actively engaging in the trade of digital currencies to make a profit. The market of cryptocurrency is highly volatile. Where it provides an opportunity to the trader to make a skyrocket profit within a minute.

Moreover, at the same time, traders may lose their money in moments. Therefore, traders need to always select popular currencies to invest in. Popular currencies such as Bitcoin, Ethereum, Oecoin, Litecoin, Bitcoin Cash, Ada Coin.

How Does Cryptocurrency Work?

How Does Cryptocurrency Work

Cryptocurrency transactions between two parties occur through a decentralized ledger across the nodes over the blockchain network.

There are key pairs & wallet addresses used to send and receive cryptocurrency. Each user has their wallet and private/public keys. The public key use to encrypt the transaction, it ensures the security of the transaction. In conclusion, private Key use to redeem/use/send your cryptocurrency.

What is an Example of Cryptocurrency?

Example of Cryptocurrency

 

John sends Bitcoin to Marry. John uses the public key belonging to Marry to encrypt the transaction which can only be decrypted by Marry. Mary’s Public Key ensures that Marry is the owner of the wallet address to receive funds. The public key generates from the private key.

Marry would be able to decrypt transactions sent by John. By using her Private key matching the Public key sent to John. Marry can receive, store, and send Bitcoin using her private key.

What is the Validity of the Transaction?

what is cryptocurrency

Once you forget or lose your private Key, you wouldn’t be able to recover your cryptocurrency. As the Bitcoin transaction initiates, the miners start to confirm the validity of the transaction.

One who verifies and validates the transaction, this validated transaction disseminate over the blockchain network to other nodes. Moreover, each node on the blockchain network maintains its copy of the ledger where the validated transaction has kept the store in block & permanently stored in the blockchain.

The miner who first validates the transaction gets rewarded with Bitcoin as a mining reward to update the blockchain ledger.

Every digital currency has its own blockchain which continuously maintains a record of every transaction.

What are Coins & Tokens?

what is cryptocurrency

There is a difference between coins and tokens. Every coin has its own blockchain such as Bitcoin, Litecoin, Oecoin, and Bitcoin Cash.

However, a token generates on the already existing blockchain. Additionally, there are hundreds of tokens that have been generated on the top of the Ethereum blockchain.

Conclusion

In Conclusion, businesses use Cryptocurrencies to make instant payments with low transaction costs. Moreover, they reduced their business expenses. The traders make trades with cryptocurrencies on the crypto trading platforms. Additionally, Retailers use to extend their sales facilitating customer’s use of digital currencies.

What is Blockchain Technology? How Does it Work?

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