In the times we live in, technology has made incredible progress compared to any time in the past. This evolution has changed human life in almost every aspect. In fact, this evolution is an ongoing process and thus, human life on earth is constantly evolving day by day. One of the latest inclusions in this aspect is cryptocurrencies.
Cryptocurrency is nothing but digital currency, designed to impose security and anonymity on online monetary transactions. It uses cryptographic encryption to generate currency and verify transactions. New coins are created through a process called mining, while transactions are recorded in a public ledger, called the Transaction Block Chain.
A little backtrack
The evolution of cryptocurrency is mainly dedicated to the virtual world of the web and includes the method of transforming readable information into a code, which is almost unbreakable. Thus, it becomes easier to track purchases and transfers involving money. Cryptography, since its introduction in WWII to secure communication, has evolved in this digital age, combining mathematical theories and computer science. Therefore, it is now used to secure not only communication and information but also money transfers throughout the virtual web.
How to use cryptocurrency
It is very easy for common people to use this digital currency. Just follow the steps given below:
- You need a digital wallet (obviously, to store money)
- Use the wallet to create unique public addresses (this enables you to receive money)
- Use public addresses to transfer funds in or out of the wallet
A cryptocurrency wallet is nothing but a software program, capable of storing private and public keys. In addition to that, it can also interact with different blockchains, so that users can send and receive digital currency and also keep track of their balance.
The way digital wallets work
Unlike the traditional wallets we carry in our pockets, digital wallets do not store money. In fact, the concept of blockchain is so well integrated with cryptocurrency that currencies are never stored in a particular location. Nor are they available anywhere in hard currency or physical form. Only records of your transactions are stored in the blockchain and nothing else.
A real life example
For example, a friend sends you a digital currency, say in the form of bitcoin. What this friend does is he transfers the ownership of the coins to your wallet address. Now, when you want to use that money, you open the fund.
To open the fund, you need to match the private key of your wallet with the public address where the coins are assigned. When these private and public addresses match, your account will be credited and your wallet balance will increase. Simultaneously the balance of the sender of the digital currency will decrease. In transactions involving digital currency, the actual exchange of physical coins does not take place at any time.
Understanding cryptocurrency address
In nature, it is a public address with a unique set of characters. It allows a user or owner of a digital wallet to receive cryptocurrency from others. Each public address, which is generated, has a corresponding private address. This automatic matching verifies or establishes ownership of a public address. As a more practical analogy, you can consider a public cryptocurrency address as your email address to which others can send emails. Emails are money that people send you.
Understanding the latest version of technology, in the form of cryptocurrency is not difficult. One needs little interest and spend some time on the net to clear the basics.