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What is Cryptocurrency and how does it work ?

What is Cryptocurrency ? A cryptocurrency is a digital or virtual currency that is cryptographically secured, which makes counterfeiting or double spending nearly impossible. Many cryptocurrencies are decentralized networks based on blockchain technology – a distributed ledger implemented by a disparate network of computers. A defining characteristic of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.

A cryptocurrency is a new form of digital asset based on a network that is distributed across a large number of computers. This decentralized structure allows them to exist outside the control of governments and central authorities.

The term “cryptocurrency” is derived from encryption techniques used to secure networks.

Blockchains, which are organizational methods for ensuring the integrity of transaction data, are an essential component of many cryptocurrencies.

Many experts believe that blockchain and related technology will disrupt many industries, including finance and law.

Cryptocurrencies have faced criticism for a number of reasons, including their use for illegal activities, exchange rate volatility, and underlying infrastructure vulnerabilities. However, they have also been praised for their portability, divisibility, inflation resistance and transparency.

What is Cryptocurrency

Cryptocurrencies are systems that allow secure payments online, represented in terms of virtual “tokens”, which represent internal entries in the system. “Crypto” protects these entries by various encryption algorithms and cryptographic techniques, such as elliptic curve encryption, public-private key pairs, and hashing functions. (elliptical curve encryption, public-private key pairs, and hashing functions.)

Types of Cryptocurrency

The first blockchain-based cryptocurrency was bitcoin, which is still the most popular and most valuable. Today, there are thousands of alternative cryptocurrencies with different functions and specifications. Some of these are clones or forks of bitcoin, while others are new currencies that were created from scratch.

Bitcoin was launched in 2009 by an individual or group nicknamed “Satoshi Nakamoto”. As of 1 November 2019, there were over 18 million bitcoins in circulation with a total market cap of approximately $146 billion.

The success of bitcoin has led to some competing cryptocurrencies, known as “altcoins“, including Litecoin, Perecoin and Namecoin, as well as Ethereum, Cardano, and EOS. Today, the total value of all cryptocurrencies in existence is approximately $214 billion – bitcoin currently represents over 68% of the total value.

Some of the cryptography used in cryptocurrency today was originally developed for military applications. At one point, the government wanted to control cryptography similar to legal restrictions on weapons, but citizens’ right to use cryptography was protected on the basis of freedom of expression.

Central to the appeal and functionality of bitcoin and other cryptocurrencies is blockchain technology, which is used to keep an online ledger of all those transactions, thus providing a data structure for this ledger. It is fairly secure and is shared and agreed upon by individual nodes across the network, or maintains a copy of the computer ledger. Each new block that is generated must be verified by each node before it can be confirmed, making transaction history virtually impossible.

Many experts see blockchain technology as having serious potential for uses such as online voting and crowdfunding, and major financial institutions such as JPMorgan Chase (JPM) see the potential to reduce transaction costs by streamlining payment processing.

Although cryptocurrencies are virtual and are not stored on a central database, a digital cryptocurrency balance can be wiped by loss or destruction of a hard drive if a backup copy of the private key does not exist. At the same time, no central authority, government, or corporation that does not have your funds or your personal information can access you.

Advantages and Disadvantages of Cryptocurrency


Cryptocurrency blockchains are highly secure. Cryptocurrencies promise to make it easy to transfer funds directly between two parties, without the need for a trusted third party like a bank or credit card company. These transfers are secured by the use of public keys and private keys and various forms of incentive systems, such as proof-of-work or proof-of-stake.

In modern cryptocurrency systems, a user’s “wallet,” or account address, contains a public key, while the private key is known only to the owner and is used to sign transactions. Fund transfers are completed with minimal processing fees, allowing users to avoid the fees charged by banks and financial institutions for wire transfers.


The semi-anonymous nature of cryptocurrency transactions makes them well suited for a host of illegal activities, such as money laundering and tax evasion. However, cryptocurrencies often favor the use of cryptocurrencies for the benefit of privacy such as protection for whistleblowers or activists living under oppressive governments. Some cryptocurrencies are more private than others.

The cost of producing bitcoin, which requires a large amount of energy, is directly related to its market value.

For example, bitcoin is a relatively poor choice for conducting illegal trade, as forensic analysis of the bitcoin blockchain has helped authorities arrest and prosecute criminals. More privacy-oriented coins do exist, however, such as Dash, Monero or ZCash, which are more difficult to trace.

Criticism of Cryptocurrencies

Since market prices for cryptocurrencies are based on supply and demand, the rate at which one cryptocurrency can be exchanged for another currency can fluctuate widely, as many cryptocurrencies are designed to be highly efficient. Ensures level reduction.

Bitcoin has experienced some rapid rise and fall in value, with bitcoin climbing as high as $19,000 per bit in 2017 before falling to $7,000 in a few months of 2017. Cryptocurrency is considered a short-term fad by some economists. Betting bubble.

There is concern that cryptocurrencies like bitcoin are not contained in any physical objects. However, some research has identified that the cost of producing bitcoin, which requires a large amount of energy, is directly related to its market value.

Cryptocurrency blockchains are highly secure, but other aspects of a cryptocurrency ecosystem, including exchanges and wallets, are not immune from the threat of hacking. Over the 10-year history of bitcoin, many online exchanges have been the subject of hacking and theft, sometimes with millions of dollars of “coins” stolen.

Nonetheless, many observers see potential benefits in cryptocurrencies, such as preserving value against inflation and facilitating exchange by being more easy to transport and split than precious metals and existing outside the influence of central banks and governments. .

Devendra Singh

Hello, I am Devendra, Founder and Author of Computermash. Here you will get all information and tutorials related to computer, education, blogging.

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