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 an ongoing process and hence human life on earth is improving day by day. One of the latest inclusions in this aspect are cryptocurrencies.
Cryptocurrency is nothing but a digital currency, which is designed to impose 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 the Transaction Block Chain.
Little backtrack
The evolution of cryptocurrency is mainly attributed to the virtual world of the web and involves the procedure of transforming readable information into code, which is almost indecipherable. This makes it easier to track purchases and transfers involving currency. Cryptography, since its introduction in World War II to secure communication, has evolved into this digital age, merging with mathematical theories and computer science. Therefore, it is now used to secure not only communication and information, but also the transfer of money over the virtual web.
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 currency)
- Use the wallet to create unique public addresses (this allows you to receive currency)
- Use public addresses to transfer funds to or from your wallet
Wallets for cryptocurrencies
A cryptocurrency wallet is nothing more than a software program, which can store both private and public keys. In addition, it can communicate with different blockchains, so users can send and receive digital currency and track their balance.
How digital wallets work
Unlike conventional wallets that we carry in our pockets, digital wallets do not store money. In fact, the blockchain concept is so cleverly mixed with cryptocurrencies that currencies are never stored in a specific location. Nor do they exist anywhere in cash or physical form. Only records of your transactions and nothing else are stored in the blockchain.
A real life example
Suppose a friend sends you some digital currency, say in the form of bitcoins. What this friend does is transfer ownership of the coins to your wallet address. Now, when you want to use that money, you unlock the fund.
To unlock the pool, you need to match the private key in your wallet with the public address that the coins are assigned to. Only when these private and public addresses match will your account be credited and your wallet balance will increase. At the same time, the digital currency sender’s balance will decrease. In digital currency transactions, the actual exchange of physical coins never takes place in any case.
Understanding Cryptocurrency Address
By nature, it is a public address with a unique string of characters. This allows the user or owner of a digital wallet 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 consider a public cryptocurrency address as your email address to which others can send email. Emails are the currency people send you.
Understanding the latest version of technology, in the form of cryptocurrency, is not difficult. It takes some research and time on the internet to get the basics straight.