How does cryptocurrency work?
If not through banking systems, then how does cryptocurrency interacts and proves security?
When implemented with decentralized control, each cryptocurrency works through distributed ledger technology, also known as a blockchain that serves as a public financial transaction database. In simple terms, cryptocurrencies work using a technology called 'blockchain.'
Generally speaking, every cryptocurrency works on top of a blockchain, and a blockchain works according to a predefined set of rules (i.e. an underlying protocol). The protocol is what defines how the blockchain and the cryptocurrency system should operate.
Cryptocurrencies have huge potential within them:
Cryptocurrency can be seen as the currency of the future which is going to increase immensely in value.
Cryptocurrency removes central banks from managing the money supply, which is a plus since over time these banks tend to reduce the value of money via inflation.
The technology behind cryptocurrencies, the blockchain, it’s a decentralized processing and recording system and can be more secure than traditional payment systems.
A cryptocurrency is a system that meets these conditions:
The system does not require a central authority; its state is maintained through a distributed consensus (agreement) or simply blockchain.
The system keeps an overview of cryptocurrency units and their ownership. (Cryptocurrency units = volume of cryptocurrency available with a person or the whole market).
The system defines whether new cryptocurrency units can be created, and the circumstances of their origin, and how to determine the ownership of these new units.
Ownership of cryptocurrency can be proved exclusively cryptographically.
The system allows transactions to be performed in which ownership of the cryptographic units is changed. A transaction statement can only be issued by an entity proving the current ownership of these units. (i.e. a personA owning 2 TRX can make a transaction to personB, and the personB receiving the 2 TRX will now own that cryptocurrency, to put it simply, ownership of 2 TRX is transferred from personA to personB after the original/current owner of the crypto – personA made a transaction).
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