Crypto means a person who adheres or belongs secretly to a party or group, not openly declared. Cryptocurrency is a virtual currency or digital currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology – a distributed ledger enforced by a disparate network of computers.
Cryptocurrency is produced by a public network, rather than any government that uses cryptography to make sure payments are sent and received safely. Every cryptocurrency is a unique code or serial number. Each transaction is verified through an electronic distributed ledger called the blockchain.
How is a cryptocurrency created:
Cryptocurrency or Crypto coins creation depends on what is defined by a given cryptocurrency, code. It is created by a process called mining. A different process is adopted during the creation of Cryptocurrency.
In many Cryptocurrencies, after the completion of mining, a new coin is created. How exactly coins are created depends on what is defined by a given crypto currency’s code. Cryptocurrency is created by solving mathematical puzzles in a computer-intensive process called mining. Cryptocurrency is stored in wallets or digital directories accessed by password. Cryptocurrency can be broken into smaller unique units. One can trade fractions of cryptocurrency or crypto coins.
So cryptocurrency is software and a transaction is recorded and is dictated by code. Cryptocurrency transactions have stored in a database known as a blockchain. It is created by algorithms that rely on cryptography. Cryptocurrency software is decentralized and distributed, it means it is hosted on many computers across the world. The algorithms are written to award coins to computers that add transactions to the blockchain.
Control and verification of cryptocurrency:
Cryptocurrency is neither backed by any banks or governments nor is it recognized as legal currency. Private parties are able to use bitcoin for transactions if agreed upon and it is also purchased and traded on the exchange by investors.
Three easy steps are there to verify Cryptocurrency.
Step 1: Note your transaction ID: After sending cryptocurrency from one wallet to another wallet. One receives a transaction ID. This transaction id represents a unique fingerprint of the transaction and allows the transaction to be tracked. Make sure to save the transaction id.
Step 2: Input Transaction ID into the Blockchain: Different cryptocurrency has their own blockchain, which can be accessed from a website. For Bitcoin, one can track at https://blockchain.info/.
Enter Transaction ID into the search field of the website and they can know the details of transactions. If one forgot to copy or save the Transaction ID, he can search by using the exchange or wallet address.
Step 3: Check the status of the transaction & verify its details: All the details regarding the transaction will show after entering the transaction id. One can verify the details of the transaction and check its status.
Number of Cryptocurrencies:
There are more than four thousand cryptocurrencies of which some has a very little volume of transactions. Some of the important cryptocurrencies include Bitcoin, Ethereum, Litecoin, Cardano etc. Most cryptocurrency is not linked to an asset but some are stably linked to an asset like the US dollar or a basket of currencies. Many countries have legalized Cryptocurrency like Morocco, Nigeria, Namibia, the United States etc. China is also developing a cryptocurrency called the digital Yuan, a so-called central bank digital currency that aims to replace some of the cash in circulation.
Transactions through Cryptocurrency:
Transactions are sent between peers using software called cryptocurrency wallets. The person creating the transaction uses the wallet transfer balances from one account (AKA a public address) to another. To transfer funds knowledge of a password (AKA a private key) associated with the account is needed. Transaction made between peers is encrypted and then broadcast to the crypto currency’s network and queued up to be added to the public ledger. Transactions are then recorded on the public ledger via a process called mining.
All users of a given cryptocurrency have access to the ledger if they choose to access it. The transaction amounts are public by who has sent the transaction is encrypted. Each transaction leads back to a unique set of keys. Whoever owns a set of keys, owns the amount of cryptocurrency associated with those keys. Many transactions are added to a ledger at once. These blocks of transactions are added sequentially by miners. That is why the ledger and the technology behind it are called “block” “chain”. It is a “chain” of “blocks” of transactions.
How Cryptography works with cryptocurrency:
The keys that move balances around the blockchain utilize a type of one-way cryptography, called public key cryptography. The “hashes” (the one-way cryptographic codes that tie together blocks on the block chain) use a similar type of cryptography. Meanwhile, transaction data sent and stored on the blockchain is tokenized (tokenization is a type of one way cryptography that points to data but doesn’t contain all the original data).
The key to understanding these layers of encryption which ensure a system like Bitcoin’s (Some coins work a little differently) is found in one way cryptographic functions (cryptographic hash functions, cryptographic tokens and public key cryptography are names for specific, but related types of one-way cryptographic functions). The main idea is that cryptocurrency uses a type of cryptography that is easy to compute one way, but hard to compute the other way without a “key” So we can say that it is easy to create a strong password but it is very hard for others to guess a strong password after it has been created.
Cons of Cryptocurrency:
1. It can be difficult to comprehend.
2. Challenges of market fluctuation.
3. No security in case of loss.
4. Cyber security issues.
5. Price volatility and lack of inherent
6. Potential shortage of resources value.
7. Potential mismanagement
Pros of Cryptocurrency:
1. Unparalleled Transparency.
2. Instant and 24-hour accessibility.
3. Absolute secrecy.
4. Massive potential for returns.
5. Short time horizon.
6. Increased liquidity.