Most of us have heard about the term “cryptocurrency” but only a few actually understand its meaning and how it works. Fortunately for you, I’ll get them all covered so let’s begin.
What Is Cryptocurrency?
Before we discuss how cryptocurrency work, let’s define what it is. A cryptocurrency is a form of digital currency that utilizes cryptography to create transactions. Unlike a bank, it involves no middlemen and exchanged between peers.
Popular examples of cryptocurrencies are Bitcoin and Etherium. They’re normally stored in digital wallets that live on the blockchain. As long as you’re connected to the internet, you can access your wallets anywhere in the world.
So, How Does The Transaction Work?
Cryptocurrency basically works similar to a bank credit on a debit card. In both situations, a complicated system works secretly to allow you to send and receive currency via electronic. The only distinction is that cryptocurrency uses an algorithm to release the currency and hold the ledgers, instead of middlemen.
The transaction starts when someone makes a request and is recognized almost instantly by the entire [network of computers called nodes] (https://blockgeeks.com/guides/what-is-cryptocurrency/). These nodes then validate the transaction using familiar algorithms. Once verified, the transaction is recorded on the ledger, also known as blockchain.
The transaction can only be changed when it’s not yet confirmed. When it’s confirmed, then it becomes irreversible and permanent. Also, only miners can validate the transactions and identify them as legit so they hold the most significant role in the cryptocurrency system.