WHAT IS CRYPTOCURRENCY

Cryptocurrency is a form of digital money that uses cryptography for security. 

It is a currency connected with the internet that uses cryptography, the process of converting readable information into an almost uncrackable code, to track purchases and transfers.

Cryptocurrency

To understand how crypt currency works, following are main concepts to become familiar with:

Encryption

Encryption 

The process of converting information or data into a code by using key, especially to prevent unauthorized access. When using crypt currency as a source of exchange, instead of using a single key for encryption and decryption, use different   encryption keys are used for both. A user generates a pair of keys that are linked to each other. Public key is used for encryption and private key is used for decryption.

Decentralized

The move of decision making power, assignment of responsibility and accountability for results. It is accompanied by allotment of appropriate authority to individuals or units at all levels of an association.

Cryptocurrencies are a protocol just like http, IP, or the internet – they aren’t completely owned by any individuals. It’s a network oriented system that manages by simple mathematical rules on which everyone who participates on the network agrees.

Distributed Systems

A model whose components are located on a network of computers. These computers communicate and coordinate their actions by passing messages along to one another.

Open Source Code

Cryptocurrencies are typically open-source. This means anyone can create API’s without paying fee and anyone can use or join the network.

Transaction

When we send Bit coin, a data structure is created by our wallet client by using an encrypted electronic signature. It is then broadcasted on the network via a public ledger to provide proof that the transaction actually happened. Bitcoin nodes on the network will relay and rebroadcast the transaction, and if the transaction is valid, nodes will include it.

Block chain

Block chain is a database that maintains a constantly growing set of data records. It is distributed in nature, meaning that there is no master computer holding the entire chain. Rather, the participating nodes have a copy of the chain. It’s also ever-growing — data records are only added to the chain.

Node

A node is simply a computer that is participating in the global Bitcoin network by speaking a protocol, ‘the Bitcoin’ protocol, which allows these intersections on the network to communicate with each other.

Nodes that are participating on Bitcoin serve the most important purpose; every one of them acts as an authoritative, verifier of every single transaction and block.

The node takes the transaction data, and independently verifies every aspect of that transaction. It authoritatively reconciles it with its own copy of the ledger to determine whether the funds have been double spent. If you send a node a transaction that is incorrect, it will not only reject the transaction, it will stop talking to you.

Mining

Mining is the process by which transactions are verified and added to the public ledger, known as the blockchain – it is also the means through which new bitcoin are released. Anyone with access to the internet and suitable hardware can participate in mining.

The mining process involves compiling recent transactions into blocks and trying to solve a computationally difficult puzzle.