How "Crypto" Currencies Work- A Brief Overview - Tech Magazine

How “Crypto” Currencies Work- A Brief Overview

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History of Cryptocurrency

In the early 80s, the token was issued to the customers as a redeemable virtual currency which can be used for purchases or credits or transfers to other people as well. The first released cryptocurrency that is Bitcoin was introduced in 2009 as open-source software. It has played a vital role in cryptocurrency. Many people thought its gonna fade in two or three years because 1 Bit coin’s value was only a few cents but only in five years it is leading with skyrocketing prices.

What is Cryptocurrency?

Cryptocurrency was designed to use as a medium of exchange like any other currency but with a few advantages. The government can’t track or control the transaction of cryptocurrency because it is decentralized. It works on the block-chain mechanism. These are used by private groups or individuals as digital currency for means of exchange. Cryptocurrencies use complex codes and protocols which are cryptographic to secure the sensitive encrypted data transfers.  Specialized cryptographic developers build these protocols to ensure security and reliability in the transactions. Advanced computer engineering and mathematical methods are used to make these protocol to make it impossible to break them virtually. These protocols help in masking the identities of the users, making it more difficult for other groups or individual to track or identify the transaction and the trader.

Characteristics of Cryptocurrency

Decentralized:

Most of the currencies are controlled by the government but cryptocurrency’s transaction and circulation are controlled by codes because it is open source and decentralized.

Digital:

Cryptocurrency is all digital form of currency and not at all like traditional form that are defined by physical objects. No physical objects exist in cryptocurrency as they are saved in digital wallets and transactions are made from one party to another digitally.

Open source:

They are fully open source. The developers can make the interface with paying any fee and any user can join the network.

Value:

It has to have a good value to be an efficient currency. Coins are generated by the miners. The supply and demand of these coins ascertain the fluctuation in its value and the whole work behind mining coins also decides its value.

Flexible scaling

These are introduced with a measure to work for both large as well as small scale organization.

How cryptocurrency works?

It works on block-chain technology. The typical secure codes and technical regulations that control the working of the cryptocurrency are extremely complex. However, person of no knowledge can also be a cryptocurrency user and can master the concepts of the same. The integrity, value, and security of currency is governed by numerous concepts. The cryptocurrency wallet software is used to transfer funds form one account to another by the user. The transaction made in this are fully encrypted and cannot be accessed by any user.

The working of cryptocurrency

Transactions:

Transfer of virtual funds from one digital wallet to another is called a transaction. Their transaction waits for the confirmation when submitted to a public ledger. When the transaction is being processed, the wallet requires a digital signature to operate. The digital signature that are used, are in encrypted form and are called cryptographic signature. The confirmation of the transaction takes times.

Mining:
This is another important aspect of cryptocurrency. The process of checking the history of the user to confirm the transaction is called mining. They confirm the transaction and adds them into the public ledger. To add the minors into the ledger, they have to solve a puzzle. The first one to solve the puzzle adds the block of the transaction in the public ledger. No miner or user can change the pattern of the transaction once added to the block. All transaction are permanent which are once added to the block. This process gives value to the cryptocurrency.

Public ledger:
All the confirmed transactions from the mining are stored in public ledger. The information stored in the public ledger is in encrypted form and to make sure the conformity of the rules, different cryptographic techniques are used. The ledger calculates an accurate spendable balance for the correspondence digital wallets as well. It also ensures the authenticity and use of valid coin currency owned by the spender of each transaction. Each currency has different names for this ledger like in Bitcoin public ledger is called transaction block chain.

Future of cryptocurrency

  1. In the banking sector
    Cryptocurrency is developing cryptocurrency banks. Much private organization has launched a cryptocurrency debit card for a better transaction. Other financial institutions are also finding interest in cryptocurrency potential applications. The response of banking and other institution on cryptocurrency have increased over time.
  2. Education
    More and more, universities and schools in the USA, Cyprus, Germany, and Switzerland are accepting Bitcoin as a form of payment. The future of these currencies in the education sector is crystal clear. As the currency will become more popular, payments through this method will automatically grow faster.
  3. Fund raising
    Many organizations are raising funds using cryptocurrency as they believe it is easier to track and obtain money. Mainly start-up companies are looking forward to this to raise money instead of getting it from VC funding or Kickstarter like online funding companies. It brings revolution in the fund raising process.

Conclusion

Cryptocurrency is a fast and global medium of exchange. It is reliable because it is secured by the mathematical approach, not by any person or government that is why it is almost impossible to break through the transactions. It works totally on block-chain mechanism and transactions are saved in the public ledger after being confirmed in the mining process. The cryptocurrency rates of each coin depend on the demand and supply at that particular time, it fluctuates frequently. The working is complex but not that difficult to adapt for a new user. There are a few sectors which are experimenting with the use of cryptocurrency in their daily transactions Hence, it is the revolution in digitization of every transaction.

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