Blockchain is a system which permits the maintenance of a single updated, valid and secured ledger among multiple connected computers. It is pertinent to know that blockchain technology gives room for a transparent, secure and eagle-speed transfer of digital goods from one person to another. Anytime a transaction takes place, the date, its source and every other piece of information about the exchange are added to a block. All transactions done minutes or moments ago are contained in the block. Collective miners check and confirm how valid the transactions are within the protected block.
As soon as the complex puzzles are solved using computers designed to make good use of their GPU cycles, the transactions and the block will be confirmed valid. The new transactions within a block that are confirmed to be valid are then added to the very recent verified block in the chain. This then creates a kind of sequential ledger which is made visible to anyone who wishes to see it. This process repeats itself and is being frequently updated. The chain and its blocks are then sent to a large number of machines across a network. By so doing, it becomes impossible to forge, as the latest version of the decentralized ledger becomes almost ubiquitous. So, we can boldly say that blockchain technology allows us to make digital transactions from one person to another knowing full well that reliable checks and balances are already put in place.
Wonders of Cryptocurrencies
A virtual or digital currency used as a medium of exchange is known as cryptocurrency. One can boldly say that cryptocurrencies are limited entries in a database that cannot be changed by anyone unless some specific conditions are met. Transactions are verified and secured using cryptography. It also helps in regulating the creation of new units of a cryptocurrency. Cryptocurrency is almost the equivalent of using a debit card or PayPal. Cryptocurrency is parallel to fiat currency in that it is decentralized, whereas fiat currency is centrally controlled. Cryptocurrencies are controlled by an algorithm and the users themselves. People who get involved in the process of creating new coins are called miners. They seek to confirm transactions by solving cryptographic puzzles. Eric Schmidt in his words said, “Bitcoin is a remarkable cryptographic achievement. The ability to create something which is not duplicable in the digital world has enormous value. A lot of people will build businesses on top of that”. The future of cryptocurrency looks exceptionally bright.
Things you can do with Cryptocurrency
Bill Gates in his words said, “Bitcoin is exciting because it shows how cheap it can be. It is preferred to currency in that you don’t necessarily need to be physically present in the same place. When doing large transactions, currency can be really inconvenient”. There are many things you can do with cryptocurrencies.
To start with, you can always invest with cryptocurrencies. It is widely believed that cryptocurrencies are the real deal in terms of the available investment opportunities. Bitcoin is the most valuable digital currency recognized with its value increasing daily. When you buy your cryptocurrency, it is essential that you find a way to store it. Wallet services look really convenient for all important exchanges. You can also store your assets in an offline wallet to really guarantee you that your stored coins are secured. It is really important to know that cryptocurrencies are high-risk investments.
Not only that, goods can be bought with cryptocurrencies. You can use bitcoins to pay your college fees, flights, gift cards, or phone apps to mention but a few. Many merchants accept bitcoin as a viable form of payment. According to Marc Andreessen, “Bitcoin gives us, for the first time, a way for one internet user to transfer a unique piece of digital property to another internet user, such that the transfer is guaranteed to be safe and secure. The consequences of this breakthrough cannot be overemphasized”.
In addition, cryptocurrencies can be mined. Many people have become successful by mining bitcoins. Cryptocurrency miners run software and hardware in order to confirm transactions to the digital ledger. Mining is a type of investment. The popularity of cryptocurrency increases as the number of people that mine it increases. People use their computing knowledge to brainstorm and provide solutions to some complex cryptographic puzzles. A reward together with a transaction fee is given to any miner who successfully manages to solve a cryptographic puzzle. The transaction is then recorded in the distributed public ledger otherwise known as the Blockchain.
How Cryptocurrency Works
Cryptographic keys help in getting transactions done between peers from cryptocurrency wallets by matching up codes. Blockchain, which is a public ledger, records the transactions made between peers. This ledger is made available and accessible to anyone with a given cryptocurrency. It should be noted that the transaction amounts are public and the person who sends the transaction gets encrypted. Each transaction stems from a cryptocurrency wallet and anyone who owns the key to the wallet is the automatic owner of the cryptocurrency amount written on the ledger. When a cryptocurrency exchange occurs from one wallet to another using cryptographic keys, the transaction queues up and is ready to be attached to the ledger. Blocks of transactions are added to the ledger sequentially in the form of a chain.
Relations between Cryptocurrencies and Fiat Currencies
Currency declared to be legally acceptable by the government is known as fiat currency. Cryptocurrency, for example Bitcoin, is not backed by the government and is therefore not a legal tender. Fiat currencies could be in the form of US dollars, in which the supply is powerfully controlled by the central government.
Cryptocurrency is global and decentralized. Its supply is powerfully controlled by an algorithm. It is essential to note that one can’t pay taxes with cryptocurrencies because it is not a legal tender and it is not backed by the government but it is necessary one pay taxes on it.
It is equally important to know that both fiat currency and cryptocurrency are fantastic mediums of exchange for purchasing good and services. The quality of the system that surrounds them affects their values. Economic factors such as supply and demand influence the values of both fiat currencies and cryptocurrencies.