Introduction to Cryptocurrency
Cryptocurrency is a digital or virtual form of currency that uses cryptography for security. Unlike traditional currencies issued by governments (fiat money), cryptocurrencies operate on decentralized networks based on blockchain technology.
Key Characteristics
- Decentralization: No central authority controls the network.
- Transparency: All transactions are recorded on a public ledger.
- Immutability: Once a transaction is confirmed, it cannot be changed.
How Does It Work?
Cryptocurrencies run on a distributed public ledger called blockchain, a record of all transactions updated and held by currency holders. Units of cryptocurrency are created through a process called mining, which involves using computer power to solve complicated mathematical problems that generate coins.
Why It Matters
Cryptocurrencies promise to make it easier to transfer funds directly between two parties, without the need for a trusted third party like a bank or credit card company. These transfers are instead secured by the use of public keys and private keys and different forms of incentive systems, like Proof of Work or Proof of Stake.
