What are Cryptocurrencies?
Cryptocurrencies are digital currencies. They work based on cryptography. There is no regulatory body and they are not issued by any Government. They work based on demand and supply. This is the basis of their value.
The Uniqueness of Cryptocurrencies
Cryptocurrencies cannot be duplicated. They are stored and recorded on what is known as a blockchain. People volunteer to record and keep track of all transactions on the blockchain. This means there is transparency as every ledger is kept separately and can be compared with others.
How cryptocurrencies work
Everytime you make a transaction, a record is made on the blockchain. This record is made by multiple people so the data can be cross checked and validated. To do this you share all your transaction data with the blockchain. To keep your cryptocurrency secure you will have a private key which is different from the public key others can see.
The private key is used to generate the public keyso your transaction can be recorded on the blockchain. Your private key i what makes your digital assets secure.The blockchain network keeps a record of how much you have spent , bought and how much you have left. To verify this data the blockchain checks its records against all the volunteers. This takes time and causes a network delay.
To add a block transaction to the blockchain each volunteer has to solve a mathematical problem.This math problem is created by a cryptographic hash function. Bitcoin for example uses the hash function called SHA256 which stands for secure hash algorithm 256.It was initially developed by the United states National security agency. Computers designed to solve this problem usually take 10minuites.
Whoever solves the mathematical problem first is then allowed to add a record(transactions) to the blockchain.
These volunteers try to solve this problem as they are rewarded with some cryptocurrency. Whenever they solve this maths problems some new cryptocurrencies are generated out of thin air and awarded to the volunteer.These people are known commonly as miners.These miners also earn a fractional amount of the transaction for processing it.
Cryptocurrency wallets + more
You can store your cryptocurrency in specially designed wallets. Not every cryptocurrency can be stored in the same wallets.
Cryptocurrency has no refunds. So be sure you send it to the right person.
Cryptocurrency can be exchange anonymously but they can still be traced back to some degree with enough investigation.
Cryptocurrency has been known to be volatile.