Cryptocurrencies are a medium of exchange much like traditional currencies but designed and developed for use on the digital platform. The transactions are possible through particular principles of cryptography. Cryptography secures all transactions of the currencies as well as the creation of new coins. Bitcoin was the first cryptocurrency, and it is the most important currency today. Satoshi Nakamoto, the anonymous inventor of bitcoin, set out to develop a peer-to-peer electronic cash system, and ended up creating bitcoin.
Nakamoto found a way to build a decentralized digital cash system, and it has led to the creation of more cryptocurrencies. Currently, there are over 900 cryptocurrencies available on the internet. They have evolved to include elements of computer science as well as mathematical theory to become a way of secure communication for money and information online.
How Cryptocurrencies Work
Cryptocurrencies run on a decentralized technology that allows users to make or receive secure payments and store money anonymously without the need of a bank. However, all cryptocurrency transactions are recorded on a distributed public ledger known as the blockchain. The blockchain shows all the transactions as well as the number of coins on all public addresses but does not reveal the identity of the holder.
You can get the cryptocurrencies through a process called mining, where you use a computer’s processing power to solve complex math problems that generate coins. You can also buy the currencies from brokers or as payment for work done. After you receive the coins, you can store them on digital cryptographic wallets. These wallets can be on your computer or in the cloud. The most common cryptocurrencies include Bitcoin, Ethereum, Litecoin, Ripple, among others.
After the confirmation of the cryptocurrency transaction, it cannot be forged or reversed. The entire blockchain can see the number of coins transacted, and only miners can confirm the transactions. They stamp the transactions and distribute them on the blockchain.