what is cryptocurrency how it works

 what is cryptocurrency how it works

Think of them as you would arcade tokens or casino chips. You'll need to exchange real currency for the cryptocurrency to access the good or service. Cryptocurrencies work using a technology called a blockchain. Blockchain is a decentralized technology spread across many computers that manage and record transactions.

what is cryptocurrency

A cryptocurrency (or “crypto”) is a digital currency that can be used to buy goods and services but uses an online ledger with strong cryptography to secure online transactions. Much of the interest in these unregulated currencies is to trade for profit, with speculators at times driving prices skyward.

How does cryptocurrency work in simple terms?

A cryptocurrency is a type of currency that uses digital files as money. Usually, the files are created using the same ways as cryptography (the science of hiding information). Digital signatures can be used to keep the transactions safe and let other people check that the transactions are real.

Can cryptocurrency be converted to cash?

Through cryptocurrency exchanges

The first method to convert any cryptocurrency into cash is through an exchange or a broker, this is quite similar to the currency exchange system at airports of a foreign country. ... Transfer your Bitcoins to the exchange that supports buying and selling in INR.

Is cryptocurrency a good investment?

If you believe in blockchain technology, cryptocurrency is a great long-term investment. Bitcoin is seen as a store of value, and some people think Bitcoin can replace gold in the future. Ethereum, the 2nd largest cryptocurrency by market cap, also has huge growth potential as a long-term investment.

How does cryptocurrency work?

Cryptocurrency runs on blockchain technology, but what exactly is a blockchain? The term has become so commonplace, its meaning and significance are often blurred. A blockchain is simply a digital ledger of transactions. This ledger (or database) is distributed across a network of computer systems. No single system controls the ledger. Instead, a decentralized network of computers keeps a  blockchain running and authenticates its transactions. 

Proponents of blockchain technology say that it can improve transparency, increase trust and bolster the security of data being shared across a network. Detractors say that blockchain can be cumbersome, inefficient, expensive, and can use too much energy.         

Rational crypto investors buy a digital asset if they believe in the strength and utility of its underlying blockchain. All cryptocurrencies run on a blockchain, which means crypto investors are betting (whether they know it or not) on the resiliency and attractiveness of that blockchain.

Cryptocurrency transactions are recorded in perpetuity on the underlying blockchain. Groups of transactions are added to the ‘chain’ in the form of ‘blocks,’ which validate the authenticity of the transactions and keep the network up and running. All batches of transactions are recorded on the shared ledger, which is public. Anyone can go and look at the transactions being made on the major blockchains, such as Bitcoin (BTC) and Ethereum (ETH).  

But why do people dedicate computing power to validating blockchain transactions? 

The answer is, they are remunerated with the underlying cryptocurrency. This incentive-driven system is called a proof-of-work (PoW) mechanism. The computers ‘working’ to ‘prove’ the authenticity of blockchain transactions are known as miners. In return for their energy, miners receive freshly minted crypto assets.