The basics of cryptocurrency and how it works

In the time we live in, technology has made incredible advances compared to any time in the past. This evolution has redefined human life in almost every case. Indeed, this evolution is an ongoing process and, therefore, human life on earth continues to improve day by day. One of the latest inclusions in this direction is cryptocurrency.

Cryptocurrency is nothing more than a digital currency, designed to provide protection and anonymity in online financial transactions. It uses both cryptographic encryption to generate currency and verify transactions. The new coins are created by a process called mining, where transactions are recorded on a public ledger, called a transaction block chain.

Small backtrack

The evolution of cryptocurrencies is largely attributed to the virtual world of the web and involves the process of converting explicit information into a code that is almost objectionable. Thus, it becomes easier to track currency purchases and transfers. Cryptography, after the introduction of WWII for secure communication, has evolved in this digital age, mixed with mathematical theory and computer science. So, now it is used to secure not only communication and information but also money transfer across the virtual web.

How to use cryptocurrency

This digital currency is very easy for ordinary people to use. Just follow the steps below:

  • You need a digital wallet (to save money, of course)
  • Use the wallet to create unique public addresses (this enables you to accept coins)
  • Use public addresses to transfer funds to or from the wallet

Cryptocurrency Wallet

A cryptocurrency wallet is nothing more than a software program capable of storing both private and public keys. In addition, it can interact with various blockchains, so that users can keep track of when sending and receiving digital currency and maintaining their balance.

The way digital wallets work

Unlike conventional wallets that we carry in our pockets, digital wallets do not store money. In fact, the concept of blockchain has been so cleverly integrated with cryptocurrency that currencies are never stored in a particular place. Or these don’t exist anywhere in hard cash or physical form. Only records of your transactions are stored in the blockchain and nothing else.

A real life example

Suppose a friend sent you some digital currency, say in the form of bitcoin. What this friend does is transfer ownership of the coins to your wallet address. Now, when you want to use that money, you have unlocked the fund.

To unlock the funds, the personal key in your wallet must match the public address of the currency you are assigned. Simply matching both this private and public address will freeze your account and inflate your wallet balance. At the same time, the balance of the sender of digital currency will be reduced. In transactions related to digital currency, the actual exchange of real currency never occurs.

Understanding cryptocurrency addresses

By nature, it is a universal address with unique strings of characters. This enables a user or owner of a digital wallet to receive cryptocurrency from others. Each public address produced has a similar personal address. This automatic match proves or establishes ownership of a public address. As a more practical analogy, you can consider a public cryptocurrency address as your email address where others can send emails. Emails are the currency that people send you.

Understanding the latest version of technology, cryptocurrency is not solid in form. Someone needs a little interest and time on the net to clean up the basics.