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How does a cryptocurrency works?

How does a cryptocurrency work?

When it comes to cryptocurrency, the main question many people has is “How does a cryptocurrency work?”! Here we go

Cryptocurrency is a digital medium that uses the principles of cryptography.  It is an open source that beats the traditional concept of tradition flat cash owned by the government. The information is stored and transmitted in a very specific manner.

Only those, to whom the message is addressed, can read it. The purpose of using encryption is to verify a transaction and also control the currency entering the whole system through mining. Thus, it makes the system robust and secure.

These currencies hold great monetary values in the market. Cryptocurrency can benefit the users in two ways. Either the user can mine the currency or make investments. Bitcoin, founded in 2009 was the first decentralized cryptocurrency.

Read about: What is Bitcoin and How do Bitcoin works?

Concept of cryptocurrency

Centralized systems involve a middleman, which in turn affects the value of the currency. An intermediary such as banks has the power to produce flat money. Thus, financial institutions have the power to cause inflation by producing physical currency. Thus concept like cryptocurrency is to bridge this humungous gap.

Generation of cryptocurrency is proceeding through a process called mining. In this process, computers tend to solve tedious mathematical problems. In return, the miner earns digital coins. There is involvement of different levels of complexities once the miner approaches for higher levels. As it becomes difficult to earn new coins, miner’s pool

Concept of Blockchain

A miner validates a transaction also called as a block by adding it to a blockchain. The blockchain is nothing but a public ledger where the recording of all the previous transactions can be feasible. A blockchain is visible to all the miners. after initiation of a transaction, it becomes irreversible. This specific quality makes the cryptocurrency unique. Therefore, it can be justifiable to say that it is the miner that maintains the cryptocurrency community.

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Tabassum M

A research has got to come out with her writing. She writes, research and share frequent updates and trading guide. Tabassum is guest content writer at Coinpedia and contributed her effort to many other crypto blogs online.

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