Cryptocurrencies is something that everyone wants to talk about but no one really knows how they work. In this article we are going to learn what is a Cryptocurrency, concept of block-chain technology, what is Bitcoin and how to mine Bitcoin?
What Is Cryptocurrency?
A cryptocurrency or crypto is a digital or virtual currency that can be exchanged online to buy goods and services which is secured by cryptography. Cryptocurrency allows for secure payments online which are denominated in terms of virtual “tokens”. We need to exchange real currency for cryptocurrency to access the good or service.
Cryptocurrency does not exist in physical form (like paper money) and is typically not issued by a central authority. The cryptocurrency work using a technology called block-chain. Crypto refers to the various encryption algorithms and cryptographic techniques.
Types of Cryptocurrency There are more than 6,700 different cryptocurrencies are traded publicly, some cryptocurrencies are listed below.
How do cryptocurrency work?
Cryptocurrency is decentralized, that is Cryptocurrency are not issued or backed by a central authority such as a government. Rather they run over a network of computers. Still, we can buy and sell cryptocurrencies via exchanges and we can also store them in ‘wallets’. When a person wants to send cryptocurrency units to another person, they send them to that person’s digital wallet.
Cryptocurrencies maintain their own record through the use of blockchain, which is a specific type of database, it is different from normal databases in the way they store information. Blockchains store data in a block that is chained together. Blockchain creates a digital record of transactions, contracts, or certificates, that can only be added.
Block-chain records both the buyer’s and seller’s information as a hash which is generated by a complex mathematical function. Once a certain number of hashes is reached, it will be converted into a block and it will be linked to other locks on the server.
What Is Bitcoin?
Bitcoin is a decentralized digital currency that was created in Jan 2009 by Satoshi Nakamoto. Bitcoin can be used to buy merchandise anonymously. Bitcoins are not paper money like dollars, euros, or yen which is controlled by central banks or monetary authorities. Bitcoin is an example of cryptocurrency, which is produced by people all over the world using advanced computer software which solves mathematical problems.
Bitcoin exchanges allow people to buy or sell bitcoins using different currencies. We can send bitcoin to other people using mobile or web applications. Bitcoins are stored in a digital wallet, this wallet is a kind of Virtual Bank account, that allows us to receive or send bitcoins.
How Does Bitcoin Work?
There are only 21 million bitcoins because bitcoin is a fixed asset. Solving advanced mathematical problems result in the mining of bitcoin. Bitcoin built on a distributed digital record called a blockchain. Blockchain is made up of units called blocks which contain information about each transaction including date and time, buyer and seller, total value, and a unique code for each transaction. Once a block is added to the blockchain, anyone can access the block and view it. Blockchain is not controlled by any organization, it is decentralized.
How Does Bitcoin Mining Work?
Bitcoin mining is a process of adding new transactions to the bitcoin blockchain. People who mine bitcoin using a process called proof of work, deploying advanced computers in a race to solve mathematical puzzles that verify transactions. Bitcoin code rewards miners with a new bitcoin. This is how new bitcoins are created and transactions are added to the blockchain.
In the olden days, it is easy for an average person to mine bitcoin, but now bitcoin mining requires more and more computing resources. To be successful in bitcoin mining a person requires powerful computers and access to massive amounts of cheap electricity.
Best Bitcoin Mining Software
Bitcoin mining software tool uses computer power to mine cryptocurrency.
- Best Overall: CGMiner
- Best for Customization: BFGMiner
- Ease of Use: MultiMiner
- Best Centralized Management: Awesome Miner