What Is Cryptocurrency really means ?
Cryptocurrency, as the name suggests, is a form of digital money designed to be secure and anonymous in most cases. It uses a technique called cryptography — a process used to convert legible information into an almost uncrackable code, to help track purchases and transfers
Cryptography is a technique that uses elements of mathematical theory and computer science and was evolved during the World War II to securely transfer data and information. Currently, it is used to secure communications, information and money online.
Cryptocurrencies allow users to make secure payments, without having to go through banks.Some cryptocurrencies include bitcoin, Bitcoin Cash, Ethereum, DigitalNote, LiteCoin and PotCoin.
How Cryptocurrencies actually Work ?
A cryptocurrency runs on a blockchain, which is a shared ledger or document duplicated several times across a network of computers. The updated document is distributed and made available to all holders of the cryptocurrency.
Every single transaction made and the ownership of every single cryptocurrency in circulation is recorded in the blockchain. The blockchain is run by miners, who use powerful computers that tally the transactions. Their function is to update each time a transaction is made and also ensure the authenticity of information, thereby ascertaining that each transaction is secure and is processed properly and safely.
As payment for their services, miners are paid physically minted cryptocurrency as fees by vendors or merchants of each transaction.
The value of the cryptocurrency fluctuates based on demand and supply, although there is no fixed value for it. Buyers and sellers agree on a value, which is fair and is based on the value of the cryptocurrency trading elsewhere.
Since there is no intermediary like bank involved in the transaction, as it is a peer-to-peer transaction, the transaction fee that is associated with credit cards is eliminated. The identity of the buyer and seller are not revealed. However, each and every transaction is made public to all the people in the blockchain network.
One can acquire a cryptocurrency through exchanges found online or trade it for traditional currencies.
Assume X wants to buy an item valued at $10,000 and he realizes that the seller Y accepts cryptocurrency, say bitcoin, as a form of payment. X scouts around to find the prevailing exchange rate, say $1,000 per currency. X gets Y's public Bitcoin address from Y's website, although both parties remain anonymous to each other.
X can now instruct his Bitcoin client or the software installed on his computer to transfer 10 bitcoins from his wallet to Y's address. X's Bitcoin client will electronically sign the transaction request with his private key known only to him. X's public key, which is a public information, can be used for verifying the information.
When X's transaction is broadcast to the Bitcoin network, it would be verified in a few minutes by miners. The 10 bitcoins will now be transferred to Y's address.
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