What is a cryptocurrency?
Cryptocurrency is digital money. It can be used just like any other type of money you control, except for the fact that this money exists solely on hardware like your phone or computer. You can even download a wallet application onto your device to store your digital coins in for later use, or you can keep them in online wallets for quicker, but less secure access.
Because cryptocurrencies are relatively new technology, not all places you go will accept this form of digital cash. However, with increased usage, more and more online vendors are opening up their cash registers to allow you to purchase goods and services in crypto!
Here are a few advantages to this:
- Low (or no) transaction fees
- You don’t have to risk entering any credit/debit card information
- All transactions are recorded, permanently, on what is called a blockchain
It’s also important to note that cryptocurrency can’t be counterfeited due to transactions being recorded on a blockchain that is verified across a large peer to peer network.
Some examples of cryptocurrencies include Bitcoin, Ethereum, Dogecoin, and Mooncoin. There are now numerous cryptocurrencies out there, and each one has a unique flavor to it, but these are a few of my favorites.
What is a blockchain?
The blockchain is what makes cryptocurrency technology really remarkable. A blockchain is a digital ledger made up of blocks of data that typically store transaction information.
Here’s how it works: When a transaction is made, the request is sent to a computer, usually called a node, on a peer to peer network. That node will verify that the requested transaction is valid, and combine that transaction with several others to form a block of data. Other computers on the network will also verify the transaction, and the block will get added to the blockchain.
Every single node on the network has a copy of this chain, and every copy of the blockchain is verified to be exactly the same. This is important because it prevents counterfeit. For example, let’s say I have one Mooncoin in my wallet, and I want to copy it by trying to send it two places at once. I make a send request of one Mooncoin to my friend and make another send request of one Mooncoin to another wallet I own. The two transactions will get sent to two different nodes. After those nodes verify their transactions and send them to the rest of the network, some nodes will get one transaction, and other ones get the other.
This is starting to sound like a big problem, but it’s not. The transaction that is verified by the most nodes becomes valid and is added to the official blockchain. The other one is simply ignored. This ensures that no one can damage the value of the coin by producing counterfeits.
Also, since the blockchain is stored on every single node, nobody can go into their own copy and edit the transaction history. This makes the blockchain decentralized. That means that no single organization or person holds the ledger, so the system can’t be cheated. The blockchain is held by every single computer on the network to ensure fair exchange.
If you have any questions, or if you have any suggestions for what I should write about next, then just drop a comment down below!