“Cryptocurrency” comes from two words “Crypto” which is a short form of cryptography and cryptography which is a way of protecting digital assets using encryptions, and “currency” our normal fait money (papers, coins) which are controlled by the governments, banks and other institutes. It is an online digital asset designed to work as a medium of exchange in place for fait(paper) money which uses algorithms to secure finacial transactions. And that may not sound clear lets get down to know the technology behind this cryptocurrency.
Cryptocurrencies work through distributed ledger, typically block chain, which have no central authority whichh controls , they are not limited by boundaries, governments or any institute. You have full control of your assets, no central database but a ledger. A ledger is a public database where every transaction is recorded in the block chain network and made public, and due to this publicity of the transactions and behaviour of the block chain technology makes it hard for the malicious actors in the game, But what is block chain network
Block chain, Block chain.. Lets take block chain as an excel file on the network where everyone access to it but not one can edit it, And this Block chain used in the famous Cryptocurrencies like (Bitcoin and ETH) is made up of blocks linked to eachother to form what we call a block chain. Each block hold the hash, Hash of the pevious block in te chain, and the timestamp and the first block in the chain is called the gensis block and it holds no hash of the previous block since it has no block before it .Block chain works on the some few fundementals , which are actually hard to comprehend (Cryptography and DLT). Lets us look deeper and see what is going on under the hood.
How does this block chain work:
- A node starts a transaction and digitally signs it with a private key through cryptography, a transaction can carry different information that is being transafered between the two parties, can be a intiation of a payment, name them. The transaction data structure usually consisits of some logic of transfer of value, relevant terms, destination addresss, and the source address.
- A transaction is gossiped on the netwrok using the gossip protocol, this is done in the block chain network because for the transaction to be considered valid has to be validated by more than 2 nodes, the rule is the source node cannot validate it’s transaction.
- Once the transaction is confirmed, it is propagated in the network, the previous step was gossip letting the nodes know about it, but at this stage the transaction is accepted and now it is part of the network.
- The newly created block is added to the ledger, and it links its self to the previosu block in the link cryptographically, this link is a hash of the previous block.
- For the block to fully confirmed on the network must be have usually 6 block precending it , Blocks are reconfirmed every time a new block is added into the network.
But nothing to worry about all this takes place in a matter of less time.
Cryptocurrencies , as we have a variety of them e.g Bitcoin, ETH, Ripple, stella coin, more https://www.telegraph.co.uk/technology/digital-money/top-10-popular-cryptocurrencies-2018/ are held in what is are called crypto wallets, Acrypto wallet is a software or hardware for holding the tokens(your crypto coins) crypto wallets can be either web app, or native apps or desktop applications, it has a string(which is your wallet ID) looks like a SHA256 string “1GVY5eZvtc5bA6EFEGnpqJeHUC5YaV5dsb”which idenitifies you on the network, and is protected by a private key(which is you password, or a string, or file stored on your device). There are many crypo wallets depending on the cryptocurrency though some support multi-cryptocurrency, some of the examples of wallet, copay(mobile), coinbase(web), electrum(desktop). More about wallets https://www.cryptoheadlines.org/blockchain/types-of-cryptocurrency-wallet-name-of-digital-wallet-examples-and-details
How does I obtain crypto currencies now that I have the wallet
Crypto currencies can be obtained in many ways which we are going to talk about 2 which are the most popular.
Mining is process of solving the mathematical puzzles to add blocks in the block chain network and you take active part in the protecting of the block chain network. This method is best if you are willing to spend some good thousands of dollars buying the equipments(GPU, strong cooling systems), electricty bills because they are really power intensive
- Buying Cryptocurrencies from the market
Cryptocurrencies can be obtained by exchanging your fait money with the cryptocoins for example the current price of a bit coin is $7522.00 which so dynamic and changes with time, more about crypto prices https://cryptowat.ch/. Here you browse through the crypto market and select your favourite coin for example bitcoin(which is the most popular as per now), ETH, ripple… With your wallet ready you contact the saler as the following the platform guidelines. And viola. You have your crypto coins in your wallet .
How do I send and receive cryptocoins in my wallet
Well, for the process to be completed receiving or sending, either ways. The two parties must have wallets, for example you want to pay for some service and the company tells you they accept crypto coins, they will send you their wallet id and you will send the required amount of coins to that wallet id, as the process is simple the same in the process of receiving.
Some of the Crypto market https://cryptowat.ch/ also has great deal of crypto market you can check out
How safe is my wallet
The same way you care for your real wallet is the same way you should care for digital wallet, by being vigilant of spams(as is the common social engineering attack). On the other side everything is secure.