What are the key features of cryptocurrency and its working?
Cryptocurrency is the buzzword today. Many investors are showing interest in investing in digital currencies to make considerable profits in the future. It is the digital, encrypted, and decentralized currency.
Millions of people are using digital currency in retail stores and many other places to buy things. Around 1.5 million cryptocurrency wallets are active as per the recent reports. Satoshi Nakamoto is the person who has first created bitcoin.
It is a decentralized cash system where there is no third party to govern or manage your transactions. The invention of digital currencies was a huge hit.
As per bitcoin app, the key features of cryptocurrencies include:
Available in the Digital Environment
Cryptocurrencies are available only in the digital environment. The currency can be accessed on the computer or mobile device provided with internet connectivity.
There is no physical form for this currency, like the traditional one. You cannot feel the cryptocurrency like the cash. You must store this currency in the digital wallets, a software program that allows you to send and receive bitcoins or cryptocurrencies.
Operate using a Decentralized Network
There is no server for cryptocurrencies. There are many computers and devices on which this currency would be available. There is no authority such as government, person, bank, or any group to control the cryptocurrency transactions.
Part of Peer-to-peer Network
The cryptocurrency would depend on the peer-to-peer network. This network will make sure that the transactions are carried out safely.
The decentralized network will avoid fraud and interference of third parties in between. It makes the transactions quick and secure. This network allows the user to pass the bitcoins or other cryptocurrencies to the other user directly.
Others can see the transactions of two people in the network with the bitcoin address. When the transaction is completed successfully, it is recorded on the ledger. This ledger is visible to all the users on the network and is also called a blockchain.
The data that is encrypted would be in the form of code and is secured. It can only be accessed by the people who have the private key. You can convert any piece of information into a secret
code, which is known as cryptography. It is the method that is widely used in the cryptography exchange to ensure that the transactions are highly secure, anonymous, and are not controlled by any authority.
The transactions that you carry out would be recorded on the ledger. You cannot modify the data on the records. It is permanent.
Keep the Transactions Anonymous
The identity of the people who are involved in the transaction would not be revealed except the address of the cryptocurrency. The encryption would hide their identity.
Working of Cryptocurrency
Bitcoin is the most widely used cryptocurrency. You can transfer the bitcoin in one wallet to another wallet without the involvement of any third party like banks. No one manages or monitors your transactions. When you install the digital wallet on the desktop or mobile, you will get an address.
This address must be shared with the person with whom you want to carry out the transaction. When the transaction is completed, the other users are called miners. They must verify their bitcoin address on the ledger.
The miners will verify the transactions by solving the problem related to the exchange. You must solve the problem to verify the transaction. The transactions that are verified would be added to the blockchain, i.e., the ledger. There are multiple blocks, and each block would hold many transactions.
Miners who verify the transactions would get bitcoin rewards to put a lot of effort into solving the mathematical problem. They also get the transaction fee by the exchange. The double spending can be kept at bay with the public ledger.
For instance, you want to pay for a friend by duplicating the currency using one for paying a friend and the other for buying things online. It is not going to work. Every transaction would be recorded on the ledger. It becomes easier for the miners to learn that you are using the same currency multiple times.
The cryptocurrency is legal to use in the US, and there are other countries such as Australia and Canada, who are allowing people to use this currency. The decision is pending on whether or not to use cryptocurrencies by European unions