Cryptocurrency or otherwise called the virtual currency which is the much talked and debated, yet unknown to many, form of currency of current times. It is defined as “a form of decentralized digital currency which is secured by cryptography’’. This form of currency came into existence, as such currency which worked on peer to peer technology for the transaction on anytime and anywhere basis. From its creation till today it has seen a curve graph, as far its rise and fall is concerned.
Bitcoin was the first cryptocurrency, to begin with, and slowly many other forms followed. From making its mark globally it is slowing tending towards being acceptable in legal terms as well. From retailers to big players like Microsoft etc have made this virtual currency acceptable for its transaction. Even with this boon in the currency, yet many people are not aware of what is this virtual currency and how it works? The answer lies in the fact that it works on the technology of cryptography, the blockchain, and mining. Confused with these high featured words. No worries! As you read you will understand everything about this currency. Once you understand the technology, you will be able to understand its popularity.
Now let’s dig into its how is this much talked virtual currency created and its working
How Cryptocurrency Works – Explained:
There is no rocket science behind the whole creation and working of cryptocurrency. From transaction, blocks, public ledger, miners all together constitute the concept of how cryptocurrency works. It works on the technology of peer to peer electronic cash transfer. From the creation of the coins to its confirmed transactions made are stored in public digital ledgers called Blockchain. The identity of the person owing the coins is hidden. Although other forms of cryptographic techniques are adopted for validating the identity of the coin owner. A transaction is initiated from the digital wallet, where the currency is stored in another digital wallet. Then it first goes to the public ledger for confirmation. Here the miners come into the picture to confirm your transaction. Miners confirm transaction solving a complex computational problem. Once the problem is solved, the transaction is verified and added to block to the public ledger. For this process, a transactional fee is transferred to the miner’s wallet. Mining is open source so anyone become one. Once the transaction is verified and added to the block, it cannot be manipulated or reversed. It is the mining process that gives value to the coins. In short in the whole process of how cryptocurrency works, it is not physical money being transferred, rather it is just digital data.
Now let’s look into how does the cryptocurrency wallet work? Cryptocurrency is stored in forms of digital wallet called cryptocurrency wallet. This wallet consists of an address and a private key. Cryptocurrency would use this wallet address to send the coins and one uses his private key to login into the wallet. Instead of literally sending the money, it rather transmits information about the transaction. When you are making transactions via blockchain, you are transiting from one person’s address to another. These addresses are generated on blockchain on a random basis.
Why is this sudden rise of so many Cryptocurrencies?
Some cryptocurrencies are centralized while some are decentralized. Depending on the way they are mined and controlled, different types of cryptocurrencies have come up in the market such as Litecoin, Peercoin: Environmental friendly, Ethereum, Namecoin, Ripple etc. The decentralized and anonymous nature of the currency is what behind this sudden rise of so many cryptocurrencies. Unlike banks, there is no fee levied for any form of transaction. Also, it is readily available for everyone. Now with its acceptance in a retail store to big companies, made this currency valid and popular. This gain in popularity is arising the need for all types of cryptocurrencies.
How safe is it:
Even though the encryption techniques behind the whole concept of cryptocurrency keeps it secure and making any alteration of any kind needs high-end computational knowledge, yet still draws few risk. Risks from cybersecurity to mishandling of the currency for illegal activities, still remain. This can only be resolved with its rising use. More companies adopting this currency, the more will be the focus on securing this virtual currency.
Even though debatable and risky, yet cryptocurrencies are definitely rising with times. From new forms coming up every year to making it acceptable in our day to day transactions, it is creating a way to make itself available in the future. Being secure, anonymous and decentralized it has gained popularity in a very short span of time. As per predictions, it states that future of this virtual currency may be either replacing the real currency or existing in hybrid form with the dollar. Time will definitely answer the future of cryptocurrency.