12 Apr Cryptocurrency: A game changer
But How Does It Work?
The pandemic has brought to light the truth that indeed today’s society is under the pillar of a digital era. From shopping using mobile phones to cashless bill payment up to monetizing videos, photos and games played online. But one incredible manifestation of how society has become so digitalized even before the pandemic broke out is the rise of a different currency, the Cryptocurrency.
Cryptocurrency, often known as crypto-currency or crypto, refers to any digital or virtual currency that uses encryption to protect transactions. As it is a peer-to-peer system, this digital currency does not rely on banks for transaction verification. Cryptocurrency payments are digital entries in an online database that identify individual transactions, hence it is not tangible money that can be carried around and exchanged in the real world.
Satoshi Nakamoto, the man behind the first Cryptocurrency, Bitcoin (BTC) proposed the notion of this new currency to address issues that arise from the world’s current currency system. Bitcoin (BTC) was created to establish an electronic payment system and currency that could be transmitted electronically and swiftly without the intervention of central authority. Nakamoto devised an electronic exchange system that, unlike the current currency system, relied on encryption rather than trusting financial institutions for security.
Although Bitcoin remains the most popular cryptocurrency, there are now thousands of others available, including Bitcoin Cash, Ethereum, Litecoin, Cardano, Dogecoin, and XRP. Because they are alternatives to Bitcoin, they are referred to as altcoins.
Cryptocurrency seems to be a gamechanger in the digital world, but the question is how does it work?
Cryptocurrency Functions Similarly To PayPal or A Credit Card Except That Instead Of Cash You Trade Digital Assets For Products And Services
To perform a cryptocurrency transaction, you must exchange currency with a peer using a cryptocurrency wallet, which is a digital wallet- software that enables you to move money from one account to another. Payments are comparable to wire transfers or cash transactions, where money is sent directly from one party to another without passing through a bank. You don’t possess anything concrete if you hold a bitcoin, it is not actual cash. What you possess is a key that enables you to transfer a record or a unit of measurement from one person to another.
Cryptocurrencies Run On A Distributed Public Ledger Called Blockchain
Bitcoin is built on blockchain technology. It acts as a public ledger for all transactions that have been confirmed which displays the transaction totals without exposing the parties’ identities. This means that the transaction between two Bitcoin wallets is recorded on the blockchain and is protected by digital signatures that ensure the transaction was not tampered with by a third party.
Bitcoin Is Decentralized
Bitcoin is decentralized in the sense that it lacks a central authority since, in a traditional financial system, a central authority such as a bank or the government checks all transactions to ensure they are legitimate; however, in a cryptocurrency system, this is done by many volunteers. Hence, we can say that, unlike traditional currencies, cryptocurrencies have the advantage of no single organization, body, or individual regulating the transactions, rates, or amounts.
Cryptocurrency Mining Exists
Cryptocurrency units are formed through a process known as mining, this process is used to verify transactions. Mining requires a lot of computational power and intricate algorithms, but those who succeed at solving challenges with it might receive reward coins, tokens, or transaction fees. Users may also buy the currencies from brokers, which they can then keep and spend in encrypted wallets.