Cryptocurrencies remove ‘middleman in transferring wealth’ but how does the currency work?

Cryptocurrency: Expert discusses success of Bitcoin

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Cryptocurrency has grown in value and popularity in recent years and is continuing to do so. But digital currency can be confusing, with many people not knowing what it actually is.

To inform the masses, www.cryptonary.com have put together a guide to cryptocurrency, explaining what it is, how it works and examples of cryptocurrencies to look out for.

Cryptocurrency

“Cryptocurrency is a digital asset that can be transferred, stored, and traded between virtual wallets.

“The word ‘crypto’ comes from the Greek word ‘kruptos’, meaning ‘hidden’.

“It’s also used in the word ‘cryptography’: the science of encoding/decoding information or data so that it is illegible to anyone other than the intended viewer.

“The second part of the term ‘cryptocurrency’, ‘currency’, stems from the fact that Cryptocurrencies provide a medium of exchange.

“Cryptocurrencies use a new case of technology, called blockchain, to secure the network.

“This network consists of computers all around the world that work together to process and validate transactions, which are then recorded on blockchain.”

Blockchains

“Blockchains are databases, or ledgers, that store blocks of data.

“The data on each block consists of a record of all transactions that occur on the network over a period of time.

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“These blocks are continually created and ‘chained’ together using cryptographic methods.

“Once a block is created and added to the blockchain, it cannot be changed without changing all subsequent blocks around it.

The website explains that blockchains are “decentralised, immutable, censorship resistant, and permission less”.

This means they are not controlled or managed by any one, single entity, and anyone can create a wallet and then use the blockchain immediately.

The website continues: “All data stored on blockchain is public; anyone and everyone can view all the past transactions that have occurred, making it fraud resistant.

“Unless known for a fact that the wallet is owned by a certain individual or entity, the transactions are anonymous to outside viewers.”

Examples of cryptocurrencies

Bitcoin, the first cryptocurrency, was created in 2009 by a mysterious figure called Satoshi Nakamoto.

Whereas Ether, the cryptocurrency of the Ethereum network, is a programmable blockchain launched in 2015 which supports smart contracts.

The website also explained Dogecoin which is a ‘meme-coin’ created as a joke of sorts by a pair of IBM engineers back in 2013.

The digital currency has since gained traction with the likes of Elon Musk tweeting about it, and showing his support.

Cryptionary concluded by providing further insight into blockchain, which many people will be intrigued by.

It said: “Blockchain technology has developed leaps and bounds since its inception.

“Brand new ideas such as decentralised finance, or DeFi, are growing massively in popularity. Bitcoin is even accepted as legal tender in El Salvador.

“Cryptocurrencies are attractive to many because they offer true control over your wealth.

“They allow for the removal of the middleman when transferring wealth, making payments, and creating or executing complex financial agreements.”

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