Science of cryptocurrency

Science of Cryptocurrency

Cryptocurrency is based on the use of cryptography, information technology, and a distributed database. Fundamentally, Bitcoin and Ethereum, like almost all other cryptocurrencies, are based on, if not entirely built upon a distributed ledger, known as a block chain.

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Cryptography

Cryptography offers the security of the implementation of transactions. The public and private keys are used in encryption and decryption of information and thus enables its users to transact with assets without having to deal with a third party institution. The use of signatures in digital form ensures the validity of certain transactions and at the same time facilitate reduction of cases of fraud.

Decentralization

Cryptocurrencies are virtual, that is, they are not regulated by a central authority, such as a central bank. This is done by so-called nodes which are computers that simultaneously also process and approve transactions. Decentralization lessen the vulnerability of failure from single point and increases security.

Consensus Mechanisms

Cryptocurrencies themselves use consensus algorithms of either PoW or PoS to verify the transactions. Such mechanisms also guarantee accord in the network hence eliminating double spending and building trust.

This synergy between science and technology is the foundation to the increasing probability of cryptocurrency to transform the financial industry.