How Does Crypto Work?
The term "cryptocurrency" describes a type of digital or virtual money that is secured via encryption. Blockchain technology, which is built on decentralised networks and enforced by a network of computers called nodes, allows cryptocurrencies to function differently than traditional currencies issued by governments.
The blockchain is a distributed ledger that stores all of a cryptocurrency transaction in a chronological order. Transactions are added to the blockchain in a linear, chronological order after a block is full with them. To prevent tampering with previous transactions without affecting all blocks that follow, cryptographic algorithms are used to protect this procedure.
There is no middleman, like a bank, and transactions take place directly between users. Nodes in the network use cryptography to confirm these transactions, and the blockchain records them. With a public key serving as a transaction address and a private key used to authorise transactions, users save their cryptocurrency holdings in digital wallets.
In order to validate transactions and add them to the blockchain, mining uses powerful computers to solve complicated mathematical problems. This process creates cryptocurrency. The creation of new currencies as a reward for mining encourages miners to maintain the network secure.
Bitcoin, which debuted in 2009, is still the most famous cryptocurrency. In the time after, hundreds of different cryptocurrencies, or altcoins, emerged, each with its own set of advantages and disadvantages. You can buy things online, invest in them, and even use them in decentralised finance (DeFi) apps—all with cryptocurrencies.