WHAT IS CRYPTO-CURRENCY?
The word “CRYPTO” itself means [hidden or secret] and we know that cURRENCY is a medium of exchange and storehold of wealth, which means it is something that can be given to others to purchase goods and services.
A cryptocurrency is a digital currency that uses cryptography for security-
•it operates independently of a central bank and is typically based on a decentralized network.
• Transactions are recorded on a distributor ledger called ” BLOCKCHAIN“.
now we will discuss each and every word In detail that is new and then combine to see how any cryptocurrency works as a whole.
WHAT IS CRYPTOGRAPHY?
I It is the practice and study of techniques for secure communication in the presence of adversarial Behaviours.
in simple terms, cryptography is a way to transform readable information into an unreadable format which is generally known as “cipher text” ( in order to protect from unauthorized access)
The process of transforming the unreadable cipher text into its original readable format is called dECRYPTION.
• READABLE INFORMATION -> CIPHER TEXT OR UNREADABLE FORMAT – CRYPTOGRAPHY.
•CIPHER TEXT -> READABLE FORMAT- DECRYPTION.
WHAT IS DECENTRALIZED NETWORK?
It is a type of network where resources are located on many different computers rather than on a single central computer.
In a decentralized network, each node in the network can perform the same function as any other node, which means that there is no single point of failure.
[ NODE: A node in a cryptocurrency is a computer that is a part of the blockchain network, Nodes are responsible for keeping track of transactions.]
For example – Bitcoin operates on a decentralized network, where every participant has a copy of the blockchain ledger and transactions are validated by network participants called miners, which ensures that no single entity has control over the entire network, making it secure & transparent.
WHAT IS BLOCKCHAIN?
Well to make it simple for understanding, let’s consider the blockchain as a NOTEBOOK.
[ BLOCK- CHAIN]
•a bLOCK is a page in the notebook, each page records a list of transactions [ eg: Ram sent Sham $10]
• A CHAIN is where these ( BLOCKs) are linked together in order like a chain, once a page is filled it gets added to the stack of previous pages, and a new page starts.
Which creates a timeline of transactions that everyone can follow, well now you can ask me where the function of decentralized went.
Well, it uses the property of a decentralized because instead of one person owning this notebook copies of it are stored in many computers around the World which makes it harder for anyone to cheat, hack, or change the record.
Each page ( BLOCK) is locked with a special code called the hash, if someone tries to do any wrong then the code breaks and everyone gets the alert.
THE NATURE OF TRANSPARENCY –
Everyone can see the transaction but no one knows who made them. this keeps things fair and private at the same time.
For example:
BITCOIN: a blockchain is used to record Bitcoin transactions when you send BItcoin to someone it’s written in a block in other words page and everyone can see it but none can fake it.
So for Bitcoin, there is a blockchain,
for Ethereum, there is a blockchain
For DOGE there is a blockchain, as for all other cryptocurrencies.
Every single coin has its own valuation and its own blockchain where its transactions are stored.
now I do expect every single reader to have at least some kind of idea on cryptocurrency as on what it is and how it works.
SO WHAT DID YOU UNDERSTAND?
Since it’s my first ever writing on cryptocurrency, I have tried to make it as simple as possible for every individual to read and understand.
Observe that cryptocurrency is not a gambling place to be in or it’s not a place to invest if you are starting early as an investor, only invest money when you are ready to lose, well you can call it a disclaimer.
in our next article on the dynamics of cryptocurrency, we will discuss a lot on the investing part of it, do let me know how you liked it in the comments and what are the thoughts that I should add on it as well.