What Is Cryptocurrency & How Does It Work?

What Is Cryptocurrency

What Is A Cryptocurrency?

Cryptocurrency is a digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of this security feature. Many cryptocurrencies are decentralized systems based on blockchain technology, a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.

The first cryptocurrency to capture the public imagination was Bitcoin, which was launched in 2009 by an individual or group known under the pseudonym, Satoshi Nakamoto. As of September 2015, there were over 14.6 million bitcoins in circulation with a total market value of $3.4 billion. Bitcoin’s success has spawned several competing cryptocurrencies, such as Litecoin, Namecoin, and PPCoin (peer-to-peer coin).

How Do You Make Money With Cryptocurrencies?

You can also earn money with cryptocurrencies by selling them to people who want to use them as an investment. The majority of people buying Bitcoin and other cryptos are not using it to make purchases online. Instead, they’re buying it in hopes that its value will go up. So you can sell your digital currency at a higher price than what you paid for it, thus generating profit for yourself.

There’s another way to make money with cryptocurrency: mining for coins yourself. Cryptocurrency mining is the process of solving complex math problems using computer hardware (graphics cards) and electricity to essentially validate transactions on the blockchain network. When you mine a coin, you get rewarded with more of that coin; if you mine Bitcoin, for instance, then you receive more Bitcoin as a reward! It sounds like an ideal way to generate income with no effort apart from keeping your computer running all day long… but there’s one major catch: You’ll need extremely powerful processors (and lots of electricity!) to compete against other miners on the network and earn any coins this way.

When Did The First Cryptocurrency Begin?

Cryptocurrencies are digital assets that can be exchanged on the internet. Cryptocurrency is a decentralized digital currency. These currencies don’t rely on a single server to process transactions. Instead, they use blockchain technology to record transactions across multiple computers so that the record cannot be altered retroactively without altering all subsequent blocks.

What is Blockchain Technology?

A blockchain is a list of records called blocks that are linked together by cryptography. Each block in the chain contains a hash pointer as a link to the previous block, along with transaction data (value). This makes it impossible for anyone to manipulate or change an existing blockchain. A computer must operate 24/7 and expend energy to make changes in this public ledger. It also has no single point of failure because no central administrator is controlling the network like with banks or even most websites today.

How Does Bitcoin Mining Work?

Bitcoin mining is the process by which new bitcoins are entered into circulation, but it is also a critical component of the maintenance and development of the blockchain ledger.

The mining process involves compiling recent transactions into blocks and trying to solve a computationally difficult puzzle. The participant who first solves the puzzle gets to place the next block on the blockchain and claim the rewards. The rewards, which incentivize mining, are both the transaction fees associated with the transactions compiled in the block as well as the newly released bitcoin.

Mining is also the mechanism used to introduce bitcoins into the system: Miners are paid any transaction fees as well as a “subsidy” of newly created coins. This both serves the purpose of disseminating new coins in a decentralized manner as well as motivating people to provide security for the system through mining.

How Many Types of Cryptocurrency Are There?

There are hundreds of different types of cryptocurrencies. Bitcoin is the most popular, but many more exist. One of the best places to find a complete list is on CoinMarketCap.

Other cryptocurrencies include Ethereum (ETH), Litecoin (LTC), Ripple (XRP), Monero (XMR), Dash, and Zcash (ZEC). There’s also something called altcoins which are alternative coins to Bitcoin. Altcoins are very similar to Bitcoin since they share many of its features, but they can differ in other ways such as additional features or underlying technology.

It’s important to do your research before investing in cryptocurrency because it has its challenges and risks, just like any other investment instrument. Some people tend not to invest because of the volatility, but others don’t mind that risk and look at it as an opportunity for quick gains.

7 Things you need to know about Cryptocurrency