The basics of cryptocurrency and how it works

In our times, technology has made incredible progress compared to any time in the past. This development 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 day by day. Cryptocurrencies are one of the latest impulses in this aspect.

A cryptocurrency is nothing but a digital currency, which is designed to enforce security and anonymity in monetary transactions over the Internet. Cryptocurrency is used to create currency and verify transactions. New coins are created through a process called mining, while transactions are recorded in the general ledger, which is called chain block transactions.

A little bit back off

The development of cryptocurrency is mainly attributed to the virtual world of the web and involves the procedure of converting readable information into code, which is virtually unbreakable. Thus, it becomes easy to track currency related purchases and conversions. Cryptology, since its introduction in World War II to secure communication, has developed in this digital age, blended with mathematical theories and computer science. Hence, it is now used not only to secure communications and information but also to secure money transfers via the virtual web.

How to use the cryptocurrency

It is very easy for ordinary people to take advantage of this digital currency. Just follow the steps given below:

  • You need a digital wallet (obviously, to store the coin)
  • Take advantage of the wallet to create unique public addresses (this allows you to receive currency)
  • Use public addresses to transfer money in or out of the wallet

Cryptocurrency wallets

A cryptocurrency wallet is nothing but a software program capable of storing private and public keys. In addition to that, it can also interact with different blockchains, so that users can send and receive cryptocurrencies as well as track their balance.

How digital wallets work

Unlike the traditional wallets we carry in our pockets, digital wallets do not store currencies. In fact, the concept of blockchain has been cleverly blended with cryptocurrencies so that coins are not stored in a specific location. It is also not found anywhere in monetary or physical form. Only records of your transactions are stored in the blockchain and nothing else.

An example from real life

Suppose a friend sends you some digital currency, for example in the form of Bitcoin. What this friend is doing is transferring ownership of the coins to your wallet address. Now, when you want to use that money, you open the box.

In order to unlock the box, you need to match the private key in your wallet to the public address to which the coins are assigned. Only when both these private and public addresses match will it be added to your account and the balance in your wallet will be inflated. At the same time, the sender’s balance of the digital currency will decrease. In transactions related to digital currency, the physical exchange of coins does not occur in any case.

Understand the address of the cryptocurrency

By its nature, it is a generic title with a unique string of characters. This enables the user or owner of a digital wallet to receive cryptocurrencies from others. Each public address that is created has a matching private address. This automatic matching proves or validates the ownership of the public address. As a more practical analogy, you can think of the generic cryptocurrency address as your email address that others can send emails to. Email messages are the currency that people send you.

Understanding the latest version of the technology, in the form of a cryptocurrency, is not difficult. One needs a little attention and spend some time on the net to clarify the basics.