What is cryptocurrency and how it works?

What is cryptocurrency and how it works?
3 min read
11 months ago

Cryptocurrency in simple terms is a digital currency with a decentralized payment system, where there is no person or robot that would control the process. Because of this, the cryptocurrency becomes anonymous and safe. 

Relatively speaking, all transactions in the crypto network are dissolved, and it is almost impossible to find out information about a certain transfer. All this works thanks to the blockchain system. Blockchain is like a book where all information about asset accounts is stored, only in a well-encrypted and secure form.

Each transaction goes through a series of encryption processes using special hashes. They are added together and create a new common hash that does the same thing, and so on until the whole chain ends.

The currency is mined by special mining programs using complex mathematical calculations that are involved in the process of encrypting transactions and issuing new coins.

In order to protect cryptocurrency, cryptography is used. It is decentralised, meaning it is not controlled by any one institution or government. Worldcoinstats provides comprehensive information about the different types of cryptocurrency, how it works, and how they can be used.

Let us analyse in more detail where, how, and how this whole system works, how cryptocurrency is mined, and how to use it.

What cryptocurrencies exist?

The entire cryptocurrency market can be divided into several categories:

  1. Altcoins.
  2. Tokens.
  3. Stablecoins.
  4. NFT.

But it is worth remembering that Bitcoin is the first and largest cryptocurrency, so it is placed in a separate category.

  1. Altcoins are an alternative. This type of cryptocurrency in simple words is an augmented version of Bitcoin with its own blockchain and functionality. They are created to solve various problems and occupy absolute leadership in quantity (more than 99% of the entire crypto-industry is accounted for by Altcoins).

The developers of these currencies take the source code of Bitcoin as a basis and add additional features to it so that their new coin would be popular in certain areas. The most popular altcoin at the moment is Ethereum (ETH) and in fact, remains the main competitor to Bitcoin.

Popular altcoins include Dogecoin, Litecoin, Cardano, Ripple, Chainlink, and others.

  1. Tokens - This type is unique in that it does not have its own blockchain and is usually used by companies as a guarantee to investors that obligations will be fulfilled.

That is, you can draw an analogy with amusement park tokens, where they are bought for money, and in return, they get access to certain park services.

  1. Stablecoins - stability. Unlike other types, stablecoins are tied to certain material values, such as gold, oil, dollar, euro, and so on. Thus, they do not have a rapidly changing rate, like, for example, Bitcoin or Ethereum, but rather maintain a stable asset price.
  1. NFT - for collectors. NFTs are designed to transfer the rights of various works of art, 3D models, antiques, and so on to the blockchain system. That is, by buying an NFT token, for example, you can become the owner of a unique graphic image, to which only you have the right.

Overall, cryptocurrencies offer an alternative to traditional forms of money and payment systems, providing a secure and decentralised way for users to transact.

Alex 10K
Joined: 4 years ago
In case you have found a mistake in the text, please send a message to the author by selecting the mistake and pressing Ctrl-Enter.
Comments (0)

    No comments yet

You must be logged in to comment.

Sign In / Sign Up