In my previous post, I've written a little bit about Cryptocurrency. Now, I've gone further to share some information that I was able to grasp in the world wide web. If you haven't read about it, just visit this link https://steemit.com/cryptocurrency/@hamiz/a-little-bit-of-cryptocurrency
Alright so Let's start...
As I have mentioned in my previous post - a cryptocurrency is a modern form of digital money. It is designed to work as a medium of exchange using cryptography to control the creation of the currency and to secure the transaction of the currency.
Bitcoin is the very first successful Cryptocurrency. After the success of Bitcoin, many other cryptocurrencies have been successfully launched.
To Own a Cryptocurrency, you need a wallet
A wallet is software you need to own Cryptocurrency. Anyone can download a wallet for use. Most cryptocurrencies are open sources, so programmers can make their wallets. You don’t need to apply to be a member of the network or register with a central authority to use Bitcoin, all you have to do is download and install the wallet, and you are good to go!
There are two ways you can make money using cryptocurrencies
1. Investing
Investing in cryptocurrencies is no different from investing in stock. Just like stocks, cryptocurrencies are subject to change in value based on demand and supply. Investing in cryptocurrencies can bear the same risk as stock markets. Cryptocurrencies are not insured and would be subject to fluctuations, but predefined supply algorithms always play a very important role in protecting cryptocurrencies (Bitcoin’s four-year halving).
2. Mining
You can also make money by mining. Mining is when miners validate a transaction and record the transaction into the Blockchain. The sender of each transaction will have to pay some amount of money to have their transactions recorded into the Blockchain. A person can also mine a specific Cryptocurrency to solve mathematical problems and receive lots of rewards from the network.
Underlying Technology
The main reason cryptocurrencies get so much credit is because of the Blockchain - the underlying technology behind cryptocurrencies. The blockchain is a series of compiled blocks. Each of the blocks is bearing a connection to the previous block leading to the genesis block. So with the blockchain, you will able to backtrack every transaction that occurred from day one.
Let’s Talk About Transactions
A transaction is a transfer of fund between two wallets. Once a transaction is made, wallets use an electronic signature to provide a mathematical proof that the transaction is coming from the person who owns the wallet.
Transactions are only recorded after a miner has validated it. Other miners are also allowed to check the validity of the transactions without mining cryptocurrencies themselves. This makes it very easy to check if a transaction happened or not.
Once the transaction is recorded in a block, and the block is added to the blockchain, the transaction becomes immutable because every person mining will have a copy of the block added to the blockchain. So any slight change in the transaction would mean that everyone’s copy of the transaction will have to be overwritten. And that requires an immense amount of computing power which is a common man doesn’t have.
ding!
Okay, so this is where it ends as I have reached the limit of my brain to understand :)
I hope you have learned something from my post. If you like, you can follow me, resteemed, and/or upvote me.
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Hi! I am a robot. I just upvoted you! I found similar content that readers might be interested in:
https://www.quora.com/How-do-cryptocurrencies-work
Thank you @cheetah.
Thanks for sharing @hamiz .
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