How Does Cryptocurrency Work?

WHAT IS CRYPTOCURRENCY

It is imperative to understand what exactly is cryptocurrency before getting into the nitty gritties of it. According to the cointelegraph.com, cryptocurrency is a digital currency or rather a virtual currency that has been designed to work as a medium of exchange. It uses cryptography to secure the transactions that are to be made. These currencies are transferred without any intervention of the bank, other financial institutions or the government. And these transactions are then validated by miners. Also, the cryptocurrency can be stored in digital wallets. These wallets can be accessed from anywhere in the world provided you have an internet connection.

POPULAR VERDICTS ON CRYPTOCURRENCY

John Oliver’s HBO show, Last Week Tonight, dealt with the topic of cryptocurrency in great details. It also gave the viewers an insight into what and how to perceive the idea of cryptocurrency. Almost everyone is now familiar with “Bitcoins” given its massive rise and fall in the value. Oliver in his show repeatedly mentioned how cryptocurrency is a lot like computers or technology. Everything one doesn’t understand about technology is how an understanding of cryptocurrency is perceived.

There have been multiple failed attempts in trying to create digital currency, mostly revolving around fraudulence and financial constraints. After the introduction of Bitcoin in 2009, and popularly described as ‘peer to peer electronic cash system’, that is, there is no involvement of any third party server.

It is after the popularity of the Bitcoin, there have been people who have started following the whole trend of cryptocurrency, for they see it as a gateway to bank free currency. The cryptocurrency blockchain technology allows for a decentralized banking, thus making it impossible for hackers to get into this. It then becomes important to improve security and trust. This blockchain technology has now gradually gained enough popularity for bigger companies to use it in the context of their finances to improve their security.

All the firms that have adopted this Blockchain technology have gained spikes in their revenues. Of Course there is a certain skepticism that has been doing round with the rise in the purchase of these Bitcoins, however, the popularity has not only led the common people to purchase this cryptocurrency, but also firms and businesses seriously investing in it, hoping to earn greater profits.

One of the important aspects of cryptocurrency is crypto sports betting. It is almost like gambling, but without the use of actual money, but digital currency, for example the Bitcoin. It is important to note that, unlike earlier times when cryptocurrency did not gain enough popularity, cryptocurrency is now accepted as a proper mode of payment to such an extent that, you can use it even to pay your college fees. There are now marketplaces which accept only bitcoins as their currency.

Even though, with the rise in the popularity of cryptocurrency and using it for actual modes of payments, cryptocurrencies are high risk investment. As mentioned earlier, the value of the Bitcoin has massively risen and fallen, owing to which people are now more aware of and interested in cryptocurrency, the market value of the cryptocurrency keeps fluctuating like no other assets, one of the reasons being that it is unregulated.

WORKING OF THE CRYPTOCURRENCY:

However, many people are still unaware of how the cryptocurrency transactions work, given the fact that it is digital currency and there are massive risks involved in transactions of this sort. Therefore here is a brief step by step guide on how Cryptocurrency works –

STEP 1

Take for example Bitcoin. Users log in to online currency exchange portals. Then they convert the fiat currency into bitcoins and store them in a bitcoin wallet. In the case of e-money, the users of e-money, exchange this for an equivalent e-value stored in digital wallets.

STEP 2

The next step is how to make payments using cryptocurrency. The user has to send a request to the Bitcoin network. Whether to make a purchase or to make a payment using the cryptocurrency. As mentioned earlier, there are many marketplaces that are accepting payments in the form of cryptocurrency. The difference with making payments using e-money is that they use the banking portal to complete the payment, unlike cryptocurrency.

STEP 3

To verify the transactions made via cryptocurrency, the miners in the network maintain a blockchain. It takes almost ten minutes to verify the transactions. Post the verification, the data of the transaction is then broadcasted to all the users and then the ledger is updated. The major difference with e-money here is that with e-money, the notifications are generally sent via sms. And there is a record of all the transactions.

Having said all of this, one must also understand that the risk rates and fraudulence rates are high when it comes to cryptocurrency. Bitcoins are just one example of cryptocurrency which gained popularity recently. There are other forms of currency that are not as popular and have often been clubbed as failed attempts at it.