The basics of cryptocurrency – the way it works

In the times we live in, technology has made incredible strides over any time in the past. This evolution has reinterpreted human life in almost every way. In fact, this evolution is a continuous process, and consequently, human life on earth is improving day by day. One of the latest additions in this regard is cryptocurrencies.

Cryptocurrency is nothing more than a digital currency created to impose security and anonymity in online money transactions. It uses cryptographic encryption to “create currency” and “check” transactions. New coins are created through a process called mining, while transactions are recorded in a public register called the Blockchain.

Slight setback

The evolution of cryptocurrency is largely attributed to the virtual world of the Internet, which involves the process of converting readable information into code, which is almost inaccessible. This makes it easier to track currency purchases and transfers. Cryptography, since its introduction in World War II for secure communication, has evolved in this digital age, merging with mathematical theories and computer science. Thus, it is now used not only for communication and information, but also for money transfers in the virtual network.

How to use cryptocurrency?

It is very easy for ordinary people to use this digital currency. Just follow the steps below.

  • You need a digital wallet (obviously to keep the currency)
  • Use the wallet to create unique public addresses (this allows you to get the currency)
  • Use public addresses to transfer money from your wallet or money

Cryptocurrency wallets

A cryptocurrency wallet is a software program that can hold both private and public keys. In addition, it can interact with different blockchains so that users can send and receive digital currency just as they return their balance.

The work of digital wallets

Unlike regular wallets that we carry in our pockets, digital wallets do not hold currency. In fact, the concept of blockchain has been so cleverly integrated with cryptocurrency that currencies are never stored anywhere. They are nowhere to be found in cash or in kind. Only your transaction records are stored in the blockchain ոչինչ nothing else.

Real life example

Suppose a friend sends you a digital currency, say, bitcoin. What this friend is doing is transferring the ownership of the coins to your wallet. Now that you want to use that money, you have opened the fund.

To unlock the fund, you need to match the personal key of your wallet to the public address to which the coins are allocated. Only when the “private” and “public” addresses match, your account will be registered, and your wallet balance will increase. At the same time, the balance of the sender of the digital currency will decrease. There is no actual exchange of physical coins in digital currency transactions.

Understanding the address of a cryptocurrency

By its nature, it is a public message with a unique string of characters. This allows the digital wallet user or owner to receive cryptocurrency from others. Each public address that is created has a corresponding private address. This automatic match confirms or confirms the ownership of the public address. As a more practical analogy, you could consider a public cryptocurrency address as your email address to which others may send emails. Letters are the currency that people send you.

It is not difficult to understand the latest technology in the form of cryptocurrency. One has to be a little bit interested և to spend time online to find out the basics.