Cryptocurrency is a digital currency rather than a physical one like we are used to. It is transferred simply between peers, meaning that no bank or other financial institute is required, and all transactions are recorded publicly in a public ledger called a blockchain. Everything is encrypted to keep it safe and secure, and it’s not controlled by any government. It’s easy to see why people like the sound of using cryptocurrencies, and one of the most famous of all these secure currencies is bitcoin.
What Is The Process?
If you buy bitcoin with debit card, credit card, or bank transfer, for example, you will need somewhere to store it. Unlike other currencies, it can’t be kept in a standard bank account, and it’s not a physical coin or banknote, so it can’t be kept in a safety deposit box, for example. This is where the wallet comes in. You will need a wallet to keep your bitcoins safe and secure. Once you have this, you can buy goods and services, or simply wait for the price to rise and then sell your bitcoins, whenever you want.
What Is Mining?
If you hear the term mining associated with cryptocurrency, you might get an image of people digging into the earth to find coins, but of course, this isn’t what happens. A miner is someone who adds the transactions that have been made to the public ledger. The amounts of any transaction are always public, but you won’t be able to see who made the purchase or transfer. The miners add a number of transactions to the ledger at one time in blocks, hence the term ‘blockchain.’ The blockchain is literally a chain of transaction blocks.
Miners are actually in competition with one another. When a transaction is made, the details are sent out to all users who host a copy of the blockchain. These are the miners, and their task is to use software to add the transaction to the blockchain. The first one to do it is given bitcoin as a reward.
How Does Blockchain Work?
The blockchains are like a bank ledger that keeps a record of all the transactions and transfers that come with cryptocurrencies such as bitcoin. When the miners are working out what algorithms to post to the blockchain, sometimes they work together and all post at once, and confirmation that the chain works comes from a number of identical algorithms being posted. They then share the funds that are sent out to the ‘winner.’
The blockchain is used to create security. Each chain is connected to the next (and the last) using cryptographic codes that are incredibly hard to tamper with. Since to get into the data in the blockchain you would need to crack a huge number of codes all at once, it is virtually impossible to hack.
Anyone can purchase cryptocurrency, and in most cases, it can be bought in the same way you would buy any other type of currency, through an exchange system. You can trade your own currency for cryptocurrency, or you can trade one type of cryptocurrency for another.