A Cryptocurrency is a digital currency used to spend in exchange for goods and services. It can only be used with an online ledger that provides secure online transactions through a robust cryptographic mechanism. These are unregulated currencies used to draw profit.
Therefore, it can be said that Cryptocurrency is a form of payment that used to be exchanged in online ledgers for purchasing goods and services. Several companies have issued and regulated their respective currencies, which are usually called tokens, and these tokens are traded for the goods and services mainly provided by the company itself. It would help if you exchanged the real currency to get access to Cryptocurrency use for making purchases.
Cryptocurrencies work with Blockchain technology, a decentralized ledger technology used across the computers called nodes to manage and record transactions. The main reason behind the popularity of this technology is the security standards it provides. Presently, more than 6700 cryptocurrencies are in regulation in the public sphere, according to a market research website named CoinMarketCap.com. The circulation and impact of cryptocurrencies are continuously increasing, and cryptocurrencies raise money through initial coin offerings or ICOs. Some of the most popular cryptocurrencies by market capitalization may include- Bitcoin, Ethereum, Tether, Binance Coin, Cardano, Polkadot, XRP, Litecoin, Chain-link, Bitcoin Cash. Bitcoin alone is having a market capitalization value of over $969.6 billion.
There are many reasons for cryptocurrencies becoming so popular. It is based on the opinion of users and supporters. According to some supporters, Bitcoin and other such currencies are the future currency and will become more valuable in the future. For some, the reason is that cryptocurrencies remove the role of centralized banks in managing money supply which is over time has been reducing the value of money through inflation. For a large group of supporters, the reason is Blockchain technology itself because it is a decentralized recording system and is more secure than any traditional transaction system. Cryptocurrency is a system of exchange, and the system should meet some conditions to become Cryptocurrency. These conditions are:
- It is maintained through distributed consensus and does not need a central authority.
- The regulating company should define whether the new units of Cryptocurrency can be created. The system also explains the conditions for origin and determines the ownership of new units.
- Ownership of units is proved cryptographically.
- The system is specific that the ownership of the units changed with every transaction.
- The system only performs one out of multiple instructions for change of ownership of the cryptographic units.
How Does Cryptocurrency Works?
Cryptocurrency works with Blockchain technology and the increasing use of Cryptocurrency in various platforms and proliferation of this way of transactions to buy goods and services has given the emphasis on developing the understanding of this technology. Let’s understand the way Cryptocurrency works in the Blockchain networks.
- Achieving Distributed Consensus: Distributed consensus refers to a large pool of people located in geographically distinct areas and agreeing on some common prospects. Bitcoin resolved the issues related to trust-building that made a decentralized currency impossible to achieve was the Blockchain’s invention.
- Digital Signatures: Digital signatures ensure the authenticity of all the transactions that take place in the network. A verification key is required to decrypt the transactions, which are encrypted through a signing key. Digital signature application is specific that a unique signature for every transaction is achieved with a private key. Other users in the network can verify the signature using public access.
- Merkle Trees: Merkle trees are used to leverage a way to bind together some groups of authentic transactions together. Hashing technique is the way used by Merkle trees to ensure chaining together the groups of transactions. Hashing refers to the process of string transformation of characters of a key representing the original string. Every block is tagged together to the current block with a hash generated utilizing the hash of the previous block. This is why Merkle trees are also called Hash Trees. It is observed that the smallest transformation in the information exchanged will drastically manipulate the resulting hash. Merkle trees’ primary function is to use hashes to build a chain where a block of data can only be added into the network through the previous hash. If one block is changed, it causes all the other blocks to change too.
- Proof-of-Work Concept: There is no way of getting agreed on which Blockchain will summarize all transactions in the network, and this causes the emergence of different versions of the process. Here comes the role of proof-of-work, which ensures that each block takes the time to ensure that only one chain of blocks exists and it is in order. Users get rewarded with the units of currency on every chance dedicate time to process the transactions.
- Alternative Mechanisms (Proof-of-stake): Proof work takes place in a manner where the addition of new blocks in the chain relies upon the level of computational power you have. A proof-of-stake does the job in the way you are more likely to be rewarded when you have more wealth you stake in adding a block.
Blockchain technology and Cryptocurrency’s exclusive character have revolutionized transactions and exchanges for goods and services. Those who will adopt the change and accept the revolution are supposed to be benefitted the most from this technological revolution. Blockchain technology and Cryptocurrency’s functions have brought in the new age of business operations and have enhanced the overall process’s efficiency, and are guiding entrepreneurship towards new development levels. Though the efforts seem to be failing and desired success in the beginning, the implementation of the technology, but in the long run, the adoption of latest technologies like Blockchain and Cryptocurrencies seems to be marking new landmarks of success and acceleration of business processes. The technology of Cryptocurrency development is gaining space, and so as the demand for certified Cryptocurrency experts. Blockchain Council and other online learning organizations can be your key to success in the field. The Cryptocurrency Certification Consortium leverages many different certifications for Blockchain professionals to gain comprehensive knowledge in several disciplines related to cryptography that can help you as an IT professional.