What is Cryptocurrency and How to Use It
Cryptocurrency is a digital currency that works as a medium of exchange just like real-world currencies such as the US dollar. It is created through mathematical engineering (algorithm). The key idea behind cryptocurrency is that it is designed to be open, anonymous, secure, fast and bypasses traditional financial structures.
It uses encryption techniques to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. (Encryption is the process of converting legible information into an almost uncrackable code.)
Bitcoin was the first cryptocurrency that was created by Satoshi Nakamoto in 2009. It is still the most popular and valuable cryptocurrencies in the world. However, over the past decade, many new cryptocurrencies have been created, with over 900 different cryptocurrencies available on the internet. After Bitcoin, the second most talked about cryptocurrency is Either which is a token for the Ethereum project. Other popular ones are Ripple and Litecoin.
How do Cryptocurrencies Work?
Cryptocurrencies make use of decentralized technology to allow users to store money and make payments to other users on the network with complete anonymity and without going to a bank. Any cryptocurrency runs on a distributed public ledger called a blockchain. It is in this blockchain that all the transactions are recorded and the balances held by the currency holders are stored and updated.
At its core, the blockchain is essentially a database of all transactions happening in the network. The database is public and therefore not owned by any one party. It is distributed, that is, it is not stored on any one computer owned by somebody. Instead it is stored on many computers across the world. The database is constantly synchronized to keep the transactions up-to-date, and is secured by the art of cryptography making it hacker proof. (Learn more about Blockchain technology)
How to Buy Cryptocurrencies
Digital currency maintains its users complete anonymity. When you make a purchase with traditional money your personal information is attached to each and every transaction which can be used to track you and take note of your purchases. But cryptocurrency transactions carry no personal information.
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