What is Cryptocurrency?
Cryptocurrency is a digital or virtual currency that uses cryptography for security. Unlike traditional currencies governments and central banks issued, cryptocurrencies operate on decentralized networks based on blockchain technology. Here are some key points about cryptocurrencies.
Decentralization
Cryptocurrencies operate on a decentralized network of computers (nodes) that use consensus mechanisms to validate and record transactions.
This decentralized nature eliminates the need for a central authority, like a government or bank, to oversee and control the currency.
Blockchain Technology
The majority of cryptocurrencies use blockchain technology, which is a distributed ledger that records all transactions across a network of computers. Each “block” in the chain contains a list of transactions, and once a block is full, it is linked to the previous block, forming a secure and transparent chain.
Cryptography
Cryptography ensures the security of transactions and the creation of new units of cryptocurrency. Public and private keys are used to facilitate secure transactions and control access to the cryptocurrency.
Mining
Many cryptocurrencies, including Bitcoin, use a process called mining to validate transactions and add them to the blockchain. Miners use powerful computers to solve complex mathematical problems, and in return, they are rewarded with newly created cryptocurrency coins.