What is Cryptocurrency?

Samuel Edwards

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Cryptocurrency is a virtual currency based on blockchain, which has no paper expression and exists only on the Internet. So let’s understand right away what blockchain is and how it works.

Blockchain is the technology behind digital currencies. Before the advent of cryptocurrencies, to transfer money to another person, you had to go to an intermediary — a bank. So it was essential to understand how the market worked to know where to buy lisk

You don’t need an intermediary to transfer digital money: cryptocurrency works on Blockchain technology, a chain of information blocks. Blockchain is a way of storing information in blocks on a chain.

The technology works so that all transactions in the network are cryptographically encrypted, form linked blocks, and are recorded in the blockchain. Each new transaction is added to the end of the existing chain, with the next one joining it.

Blockchain entries cannot be changed, overwritten, or copied. The system will detect such actions and block the transaction. Proof-of-Work (PoW) networks are kept running by miners. The system uses its processing power to generate new blocks and coins, and miners are rewarded.

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An alternative to PoW is the Proof-of-Stake (PoS) algorithm, where transactions are validated through network nodes. PoS (Proof-of-Stake) works as follows. The more cryptocurrency the user has in his account, the more chances he has to find a new block, validate the transaction and get rewarded for it.

A cryptocurrency is a form of money circulating in a decentralized (not controlled by anyone) system.

Banks, tax, judicial, and government authorities cannot influence transactions with crypto assets. Their value also does not depend on the state, as in the case of fiat money. It is the state that triggers the production of the amount of cash it considers necessary. All transactions with cryptocurrencies are irreversible: you cannot undo or cancel a transaction.

Cryptocurrency as an alternative to centralization

So, we understood what blockchain is. Also, we advise you to go to https://alligat0r.com/blog/dogecoin-mining-pool/ and read what a mining pool is. So, now let’s understand why we need to create a cryptocurrency. But, first, let’s define how you can use it.

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You can use as cryptocurrency:

  • A means of payment (to buy goods and services);
  • A tool for making money (trading);
  • An investment asset (buying promising coins to receive income in the future or participate in the management of projects (similar to shares);
  • A tool for transactions in decentralized financial networks.

As for investing in cryptocurrency, digital money is of tremendous investment interest. Both large investors and more and more ordinary people are investing in this rapidly growing market segment. And with the right approach, investing in cryptocurrency can bring good profits (but don’t relax too much and don’t forget about possible losses).

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