What is a cryptocurrency and how does it work?

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Cryptocurrency is a digital, or virtual, currency that allows anonymous online payments to be made directly between consumers without the use of banks or other intermediaries. Cryptocurrencies have no physical expression – there are no coins or banknotes to grab. They exist only in the virtual world. Cryptocurrencies can be purchased on cryptocurrency exchanges. Their value is determined by the law of supply and demand. The more people want to buy a cryptocurrency, the higher its value, and vice versa. The most popular and best-known cryptocurrency is bitcoins. The second most popular currency is Ethereum. Making money on cryptocurrency is as easy as on online sports betting in Senegal.

However, there are over a thousand different cryptocurrencies, many of them worth a couple of euros or even less. The key difference between a cryptocurrency and regular currencies is that the cryptocurrency is decentralized. Unlike regular currencies such as the dollar or the euro, cryptocurrencies are not issued by central banks and are not supervised by the authorities of any country. Cryptocurrency units are created through a technological process. The cryptocurrency is used by about 6 million people worldwide. Most of them use bitcoins. There are also about one and a half thousand cryptocurrency ATMs.

How do cryptocurrencies work?

A “blockchain” is like a cryptocurrency accounting book that securely stores information about every transaction that has ever been made in that cryptocurrency.
When a cryptocurrency is executed, any transaction is recorded in the “blockchain” of that currency. A “blockchain” is like a cryptocurrency accounting book that securely stores information about every transaction ever made in that cryptocurrency.

How do new cryptocurrency units emerge if no one spends money?

New cryptocurrency units emerge during a process called “digging.” People who want to dig a cryptocurrency download and install programs on their computers. The computer then performs mathematical calculations to generate new bitcoin units. Cryptocurrency transactions cannot be falsified, they are secured by complex codes that encrypt each transaction: that is why they are called “cryptocurrencies”.
During the excavation process, excavator computers are used not only to create new cryptocurrency units but also to support the cryptocurrency system itself and validate the operations performed on it: since thousands of operations are performed every second, they require large network resources. New cryptocurrency units and money received as transfer fees are like a reward for cashiers for agreeing to use their computer resources to do the job. At any time, the cryptocurrency is supported by the computers of its users working together.

What is the point of using a cryptocurrency?

Because cryptocurrencies store information about each transaction, cryptocurrency transactions cannot be tampered with. Their security is ensured by complex codes that encrypt each operation: that is why they are called “cryptocurrencies”. In addition, there are no bank charges for cryptocurrency financial transactions. Because such fees are often high when transferring large sums of money or investing between countries, cryptocurrencies can help save money. Bitcoins can also be used in some places for daily operations. They are accepted by shops and businesses. For many, the most important advantage of cryptocurrencies seems to be anonymity – neither banks nor the state knows about their operations. Cryptocurrencies can be used to make financial transactions by keeping your name secret and without using banks. Anyone can create a cryptocurrency account, even those who cannot or do not want to open a bank account. Although information about each operation is recorded in the already mentioned “blockchain”, these records do not store information about the name of the person operating – the user is identified only by a unique code assigned to him, which only he knows.

Summary

Cryptocurrencies are called the money of the future, after a while, they may become a full-fledged global financial system. Despite all doubts and concerns, cryptocurrencies continue to be used, and their price and demand are growing. But it is very important to read the full information about cryptocurrency before investing money.
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