What is cryptocurrency and how does it work?
What is cryptocurrency?
Cryptocurrency is a digital property. The birth of cryptocurrency is an essential advance in technology. For the first time in history, it allows one person to securely transfer a piece of this digital property to another person, anywhere in the world. Unlike a photo stored on a smartphone that can be copied and sent around the Internet countless times, when you transfer a unit of cryptocurrency, you no longer retain possession of it. That cryptocurrency now belongs to the person or wallet where it was sent.
What is Blockchain?
The cryptocurrency process is possible because transactions are recorded on a public ledger, known as a 'blockchain.' This ledger is similar to a spreadsheet. When you transact with cryptocurrency, all individuals involved in the transaction can refer to it on this blockchain ledger to verify that it has taken place.
What is Cryptocurrency Mining?
In the case of Bitcoin, the most popular cryptocurrency, the blockchain is maintained by a worldwide network of powerful computers, called miners. These miners are responsible for permanently etching new transactions onto the blockchain so that everyone involved can see when they are complete, usually within 10 minutes. Miners compete to solve complex cryptographic math puzzles to secure this permanent transfer of Bitcoins from one person to another. As a reward for performing this hard work, the miner who solves this puzzle first receives freshly minted Bitcoins.
How to Send and Receive Cryptocurrency
You can send and receive cryptocurrency transactions with an application called a wallet
. The wallet reads the cryptocurrency’s blockchain, on the lookout for any new transactions that you have received. When you send cryptocurrency to another person, the wallet broadcasts the transaction to the miners to be permanently included on the blockchain. This transparency allows both the person sending cryptocurrency and the person receiving it to easily confirm that a transaction is final.
Your wallet is also the device that stores the 'keys' that allow you to send and receive Bitcoins. Learn more about the different types of wallets
What is Bitcoin?
Is Bitcoin a good investment?
Is Bitcoin illegal or legal in the United States?