In the previous post ("A Brief Bitcoin Introducing"), we talked about Bitcoin and its history in a few sentences. Now, here is more about the definition of Cryptocurrency and how it works. So, let us get into it.
Cryptocurrency (or "Crypto") is a virtual or digital currency or internet-based medium of exchange to utilizes Cryptography science to provide secure online transactions. Being Independent of a third party or central monetary authority such as a government or bank and using cryptographic techniques lets buy, sell, and trade Crypto securely. So, Cryptocurrencies transfer directly between two parties (it refers to the "peer-to-peer" feature) without relying on a bank or any third party. Cryptocurrency runs on decentralized public ledger technology (DLT) known as Blockchain. Blockchain manages and records transactions enforced by a disparate network of computers.
Like any currency, via Cryptocurrency, you can buy goods and services. Unlike other currencies, cryptocurrencies are digital or virtual means that exist only on computers. So, all are online, and there are no bills or physical coins.
Cryptocurrency runs on a platform known as Blockchain. As its name indicates, "Block" and "chain" is a group of connected or bounded blocks or an online ledger using cryptographic principles. Each block contains transactions verified by each computer or network member (each computer is known as a node). A new block generates by creating a transaction, and each node (also called Miner) on the network must check and verify the transaction information before being confirmed. This process is known as the Proof of Work algorithm (POW). After confirmation by nodes of the network, all transaction data adds to the Blockchain as a new block. When a new block adds to Blockchain, it becomes unforgeable and irreversible. In the end, the nodes that participate and confirm the new Block data earn a reward plus transaction fees.
Holding and saving the information of transactions, being visible all processes by anyone, and being decentralized are the noteworthy features of the online ledger. Each Block consists of digital data of a transaction like a date, time, the number of coins transferred, and the sender's and recipient's public keys (wallet addresses). Each block has its own unique code that distinguishes it from other blocks. In general, this code is called Hash.
There are three main Cryptocurrency types; Bitcoin, Altcoin, and Token.
We mentioned the Fork above, and before the next topic, let's see what does mean exactly Fork?
The Fork is one of the terms of the Blockchain industry. As mentioned above, when a new block adds to the Blockchain, the data of that block will be unforgettable and irreversible. When a Blockchain initiates with a protocol, it keeps going on forever without changing. So, the question is, how can one change a Blockchain? By creating a copy of codes of that Blockchain, Developers can make a change in anything they want. Making changes in Blockchain can be conducted for various reasons, such as a being hacked the previous Blockchain by hackers (like Ethereum), a modification that needs to make, or a solution to disagreements at the Blockchain (like Bitcoin Cash).
The two most well-known Fork in the Blockchain industry was done for Ethereum and Bitcoin.
In 2016, DAO (decentralized autonomous organization) was launched on the Ethereum Blockchain. After a while, On June 17, 2016, DAO was hacked due to vulnerabilities in its codebase (a loophole in the coding). The hacker could gain access to 3.6 million ETH, worth about $50 million at the time.
To restore the stolen funds, Ethereum Blockchain was hard forked by the development team behind Ethereum. But because all of the Ethereum enthusiasts did not agree with the Fork, Ethereum was split into two parts. The forked Ethereum has been kept going on with the Ethereum name, and the previous has been kept going on with the Ethereum Classic name.
The question is, how can one buy Cryptocurrency safety? To buy Cryptocurrency safely, follow our guide step by step.
When looking for a suitable Crypto exchange, you should notice the fees a Crypto exchange charges, the supported cryptocurrencies, the provided security features, and the offered options of storage, deposit, and withdrawal.
After choosing the platform, the next step is creating an account on that Crypto Exchange and funding your account to trade. You can purchase crypto via fiat through your credit card, ACH transfers, or wire transfers to deposit funds. Do not forget to check which payment they support. The processing time for a deposit depends on the payment option you select. It would be best to consider that the fees vary by payment method and platform.
If you want to buy a Cryptocurrency on the website or mobile platform of the Crypto Exchange, go to its market, select the order type, enter the amount of Cryptocurrency you want to purchase, and click on "Buy," and confirm the order. To "sell" also conduct the same process.
The question is; how to store Cryptocurrency?
After purchasing the Crypto, you need to store and keep it to protect it from hacking and robbery. Cryptocurrency is stored securely in a physical device or online software called Crypto Wallet. Crypto wallets interface with various Blockchains enables users to send and receive digital currency and monitor their balance.
Some exchange enables users to store their cryptocurrencies directly through the platform by providing wallet services. There are different wallets types like hardware wallets and software wallets (also renowned as cold and hot storage wallets).
Because the cold wallet resides offline and does not connect to the internet is more secure and safe from hackers. It does not mean a Hot wallet is not safe, but because of targeted by malicious individuals and more risk of hacking is less secure than a Cold wallet.
Cryptocurrency is a virtual or digital currency. Although It is not a bill or a physical coin, it's used to buy or sell goods and services. Cryptocurrency runs on the Blockchain, which contains chains of blocks that each block consists of transaction data. The first Blockchain is Bitcoin, founded in 2008 by Satoshi Nakamoto. By growing popular Bitcoin, other Cryptocurrencies have been created nonstop so far. Ethereum, founded in 2015, is the most famous Crypto after Bitcoin. The Crypto industry keeps growing, and nothing can stop it.
We tried to explain Cryptocurrency overall in a few sentences. We hope that you enjoyed it. Stay Tuned for other articles by Piprebate.