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What is Cryptocurrency? How does Cryptocurrency work?

What is Cryptocurrency?

Cryptocurrency is a complicatedly encoded system or crypto protocol to ensure the stored transacting information is secure. Cryptocurrency is developed basing on mathematics coding method and modern computing law, in order to protect its structure. Therefore, when it comes to cryptocurrency, it cannot be faked, it cannot be cheated. This protocol helps users to hide their personal information when transacting.

What is Cryptocurrency

What is Cryptocurrency?

The special point of cryptocurrency is the hierarchical management system. Due to this, the cryptocurrency is not under any third-party control such as central bank or government. Supplier and value of Cryptocurrency depend on users through its complicated code protocol. In addition, miners are the ones who use their own processing resources to verify transactions and create new cryptocurrency unit. This is an important part to make the cryptocurrency system stable.

You can exchange official money for cryptocurrencies. Each cryptocurrency has its own exchange rate. Almost of cryptocurrencies has the limit amount of total coins, which make these coin as precious as Gold. Over time, the work of cryptocurrency mining gets harder and harder, until all of the coins are exploited.

How does cryptocurrency work?

The technology and source code behind Cryptocurrency is super complicated. You cannot understand it unless you are a developer whose major is in this field. However, its applications are quite able to understand. Bitcoin, which is the most famous Blockchain application, epitomises this.

1, Blockchain

Blockchain of one Cryptocurrency is known as a ledger that notes all of the transaction information, whereas confirms who own the specific amount of cryptocurrency in the specific time. Blockchain has a limitation of length and size, but this number gets bigger over time.

A copy of Blockchain is stored in every node, which is spreading all over the World. Thus, this system is also called Distributed server. Miners continually verify and store transactions in turns.

One Cryptocurrency transaction is considered as successful when it is noted in the Blockchain. This process may take few minutes depending on the processing power of the system. Once a transaction is verified, it cannot be reserved.

2, Private key

Anyone who has Cryptocurrency gets private-key so as to prove his ownership. Who has this ownership can use that amount of cryptocurrency. Users can create their own private key. A private key is a string containing 1 – 70 characters, which is completely random created by software.

This is considered as the most secured feature of Cryptocurrency. This feature helps to lower the ability of cheating and stealing behaviour. However, it is also hard to say when you lose your private key, you will be able to get this key back.

3, Wallet

A wallet is used for proving that you are the temporary user or owner of one specific amount of cryptocurrency. All of the exchange trades offer a service to create cryptocurrency wallet, but you need to be careful due to the ability of hacking.

In addition, wallet should be backed up in the clouds, hard devices and other dedicated devices. It does not matter what wallet provider you are using, backing up is essential.

4, Miner

Miners play an important role in cryptocurrency community. They also indirectly affect the rate of cryptocurrency. Miners are the ones who offer the processing ability to the system. They are often organized into groups and teams containing dozens of miners. Thier responsibility is to offer the processing ability to verify and protect the Blockchain.

In exchange, miners will get their reward as little amount of cryptocurrency.

5, Limited supply

Almost cryptocurrency has a Limited supply, which is the one that makes it valuable. When the supply runs out of coin, the reward of miners will be very low, which is just only the fee for verifying transactions.

This prospect has not happened until now. Many experts predicted that the last unit of Bitcoin will be exploited in middle of XXII century.

Conclusion

Above is my article about “What is cryptocurrency“, which is the first concept that you need to know before joining in this World. Hopefully, you have found useful information in my article.

For more cryptocurrency articles, please follow me. Thank for reading.

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