Basics of cryptocurrency and the way it works

In the times we live in, technology has made incredible progress over any time in the past. This evolution has changed human life in almost every aspect. In fact, this evolution is a continuous process, and thus human life on earth is constantly improving day by day. One of the latest inclusions in this aspect are cryptocurrencies.

Cryptocurrency is nothing more than a digital currency that has been developed to ensure the security and anonymity of online money transactions. It uses cryptographic encryption both to create currency and to verify transactions. New coins are created through a process called mining, while transactions are recorded in a public ledger called a chain of transaction blocks.

A little way back

The evolution of cryptocurrency is mainly related to the virtual world of the network and involves the process of converting legible information into code that is virtually impossible to crack. This makes it easier to track purchases and transfers involving currency. Cryptography since its introduction in World War II to ensure the security of communications has evolved into this digital age, mingling with mathematical theories and computer science. Thus, it is now used to secure not only communication and information, but also remittances via the virtual network.

How to use cryptocurrency

Ordinary people find it very easy to use this digital currency. Just follow these steps:

  • You need a digital wallet (obviously for storing currency)
  • Use your wallet to create unique public addresses (this allows you to receive currency)
  • Use public addresses to transfer funds to or from your wallet

Cryptocurrency wallets

A cryptocurrency wallet is nothing more than software that is capable of storing both private and public keys. In addition to this it can also interact with various blockchains so that users can send and receive digital currency as well as keep track of their balance.

How digital wallets work

Unlike regular wallets that we carry in our pockets, digital wallets do not store currency. In fact, the concept of the blockchain has been so cleverly mixed with cryptocurrency that currencies are never stored in a particular place. They also do not exist anywhere in physical or physical form. The blockchain only stores records of your transactions and nothing more.

An example from life

Let’s say a friend sends you a digital currency, say, in the form of bitcoins. What this friend is doing is transferring ownership of the coin to your wallet. Now if you want to use that money, you unlock the fund.

In order to unlock the fund, you need to match the private key in your wallet with the public address to which the coin is intended. Only if these private and public addresses match will your account be credited and the balance in your wallet increase. At the same time, the balance of the sender of the digital currency will decrease. In digital currency transactions, the actual exchange of physical coins never takes place.

Understanding cryptocurrency addresses

By its nature it is a public address with a unique string of characters. This allows the user or owner of a digital wallet to receive cryptocurrency from others. Each public address generated has a corresponding private address. This automatic mapping proves or establishes ownership of a public address. As a more practical analogy, you might consider a public cryptocurrency address as an email address to which others can send emails. Emails are the currency that people send you.

Understand the latest version of the technology in the form of cryptocurrency is easy. You need to take a little interest and spend time online to understand the basics.