The basics of cryptocurrency and how it works

In the age we live in, technology has made incredible advancements than ever before. This evolution has redefined human life in almost every aspect. In fact, this evolution is a continuous process, and therefore, human life on Earth is constantly improving every day. One of the latest content in this area is cryptocurrency.

Cryptocurrency is nothing but digital currency, and its purpose is to impose security and anonymity in online currency transactions. It uses cryptographic encryption to generate currency and verify transactions. New coins are created through a process called mining, and transactions are recorded in a public ledger, which is called transaction blockchain.

Small traceback

The development of cryptocurrency is mainly attributed to the virtual world of the Internet, which involves the process of converting clear information into code, which is almost unbreakable. Therefore, it becomes easier to track purchases and transfers involving that currency. Since the Second World War, cryptography has been introduced into secure communications. Cryptography has developed in this digital age, integrating mathematical theories and computer science. Therefore, it is now used not only to protect communications and information, but also to protect the transfer of funds in virtual networks.

How to use cryptocurrency

For ordinary people, using this digital currency is very easy. Just follow the steps below:

  • You need a digital wallet (obviously, to store currency)
  • Use the wallet to create a unique public address (this allows you to receive currency)
  • Use a public address to transfer funds into or out of the wallet

Cryptocurrency wallet

A cryptocurrency wallet is nothing but a software program that can store private and public keys. In addition, it can also interact with different blockchains so that users can send and receive digital currency, and can track their balance.

How e-wallets work

Unlike the regular wallets we carry with us, digital wallets do not store currency. In fact, the concept of blockchain has been so subtly integrated with cryptocurrencies that these currencies are never stored in a specific location. They do not exist anywhere in the form of cash or in kind. Only your transaction records are stored in the blockchain, and there is no other storage.

A real example

Suppose a friend sends you some digital currency, such as Bitcoin. What this friend did is he transferred the ownership of the coin to your wallet address. Now, when you want to use the money, you can unlock the funds.

In order to unlock the funds, you need to match the private key in the wallet with the public address where the coins were distributed. Only when the two private and public addresses match, your account will be credited and the balance in your wallet will inflate. At the same time, the balance of the sender of digital currency will decrease. In transactions related to digital currencies, the exchange of actual coins will never happen.

Understanding cryptocurrency addresses

Essentially, it is a public address with a unique string. This enables users or owners of digital wallets to receive cryptocurrency from others. Each public address generated has a matching private address. This automatic matching proves or establishes the ownership of the public address. As a more practical analogy, you can think of a public cryptocurrency address as an email address to which others can send emails. Email is the currency that people send to you.

It is not difficult to understand the latest version of the technology in the form of cryptocurrency. People need a little interest and spend some time online to figure out the basics.