In the times we live in, technology has made incredible advances compared to any time in the past. This evolution has redefined human life in almost every aspect. In fact, this evolution is a continuous process and thus human life on earth is continuously improving day by day. One of the latest inclusions in this aspect is cryptocurrencies.
Cryptocurrency is nothing but a digital currency that is designed to enforce security and anonymity in online monetary transactions. It uses cryptographic encryption to both generate currency and verify transactions. New coins are created through a process called mining, while transactions are recorded in a public ledger called a transaction block chain.
A little flashback
The evolution of cryptocurrency is mainly due to the virtual world of the web and involves the procedure of transforming readable information into a code that is almost unbreakable. This makes it easier to track purchases and transfers involving the currency. Cryptography, after its introduction in World War II to secure communication, has evolved into this digital age, mixing with mathematical theories and computer science. Thus, it is now used to provide not only communication and information, but also money transfers in the virtual network.
How to use cryptocurrency
It is very easy for common people to use this digital currency. Just follow the steps below:
- You need a digital wallet (obviously to store the currency)
- Use the wallet to create unique public addresses (this allows you to receive the currency)
- Use the public addresses to transfer funds in or out of the wallet
A cryptocurrency wallet is nothing but a software program that can store both private and public keys. In addition to this, it can also interact with different blockchains so that users can send and receive digital currency and also keep track of their balance.
How digital wallets work
Unlike conventional wallets that we carry in our pockets, digital wallets do not store currency. In fact, the blockchain concept is so intelligently blended with cryptocurrency that currencies are never stored in a specific location. Nor do they exist anywhere in hard cash or physical form. Only records of your transactions are stored on the blockchain and nothing else.
A real life example
Suppose a friend sends you digital currency, say in the form of Bitcoin. What this friend does is it transfers ownership of the coins to your wallet address. Now, when you want to use this money, you have unlocked the fund.
To unlock the fund, you need to match the private key in your wallet with the public address the coins are assigned to. Only when these private and public addresses match will your account be credited and your wallet balance will swell. Simultaneously, the balance of the sender of the digital currency will decrease. In digital currency transactions, the actual exchange of physical coins never takes place at any point.
Understanding Cryptocurrency Address
By nature, it is a public address with a unique character string. This allows a user or digital wallet owner to receive cryptocurrency from others. Each public address that is generated has a corresponding private address. This automatic match proves or establishes ownership of a public address. As a more practical analogy, you can accept a public cryptocurrency address as your email address to which others can send emails. Emails are the currency people send you.
Understanding the latest version of technology in the form of cryptocurrency is not difficult. One needs a bit of interest and time on the web to clear the basics.