Top Post

Finance

What is a cryptocurrency?

By
on
September 3, 2021

A cryptocurrency also crypto money is a digital means of payment typically based on blockchain technology and cryptographic procedures such as hash functions and digital signatures. Unlike classic currencies, cryptocurrencies do not involve coins or banknotes, as all payment units are exclusively digital. These usually asymmetrically encrypted currency units are collectively generated across the entire system and, in most cases, when a cryptocurrency is launched, a defined number of units has been established. The concept of “mining” for the process of generating units has become widespread, and this explains why we often hear of “cryptocurrency mining”.

Most cardano dex platforms are based on a decentralized structure, not only the generation of new currency units but also individual transactions are typically performed in a collective mode, where multiple participants control and countersign them on the respective system. Communication usually takes place via a peer-to-peer network where all computers have the same rights.

Unlike central bank money, classic cryptocurrencies do not have a “Single Point of Failure”, so they do not have single instances on the network, whose functionality or whose action could endanger or dominate the currency system. An exception is cryptocurrencies such as Ripple, managed by private companies that claim a large part of the production of units and distribute it according to their own rules.

Cardano Dex Platform

Cryptocurrencies or crypto money are systems with payment units exclusively in digital form. Typically these cryptosystems are based on a decentralized peer-to-peer network, where all participants have the same rights and generate new currency units and perform operations collectively. Their classification as a currency is controversial, as they lack a constant value base. The concept of cryptocurrencies or the first and best-known representative, Bitcoin, was published in 2008.

Looking more precisely at the three elementary components of a cryptocurrency, it is clear that the systems managed by private companies and the state satisfy the “crypto” aspect but do not have much to do with the classic Bitcoin principle.

Encryption

Cryptography not only gives the name, but it is also the decisive discipline for the security of cryptocurrencies. Behind the concept of “cryptography” lies the science that deals with the encryption and general protection of data and information. Both are indispensable for a cashless, fully digital payment system, which should work without a central and regulatory body. Two cryptographic procedures are mainly used in cryptocurrencies:

Hash functions

Hash functions are the basic piece of the puzzle for verifying data integrity and encoding participant account addresses and operations. Furthermore, they form the basis of blockchain and block mining. Digital signatures allow you to prove the status of encrypted information without exposing it. This possibility is also used to protect the content of e-mails. In cryptocurrencies, this technology is ideal for signing transactions and communicating approval of a transaction to the network.

TAGS
RELATED POSTS