The medium of exchange that is digital like bitcoin, litecoin, ether, etc is known as cryptocurrencies or digital currencies. It uses the cryptography to ensure the data integrity and security of funds is maintained. For instance, these currencies can be used to conduct business online or purchase goods. The main feature of this currency is that it is not controlled, backed or issued by any central authority or bank. They are not subjected to conventional regulations of the financial sector.
The workings of the cryptocurrencies
The transferring of digital currencies is quite similar to sending the emails. In order to receive an email, you need to first create the email address and you share them with others. If you need to send email, you should know both the password and the address. The password is only known to you and you never share it with others. Likewise, in order to receive the digital currencies, you will be assigned an address which is also known a public key. It can be shared with everyone. Whenever you receive the address, you will immediately receive the password which is known as a private key. This private key is needed to send the digital currencies to others and you don’t share this key with anyone else.
The main features of digital currencies
In the case of digit currencies, you cannot choose the private and public key but they are assigned to the user. The key consists of strings of numbers and letters. With the help of an algorithm, the keys are linked with each other.
While setting up the private key and public key, the user does not have to disclose any personal information.
Records of the digital currency transactions are not stored on a particular central server but it is publicly distributed across thousands of computers across the globe. The records of the transactions are called a blockchain. It is kind of a distributed ledger. Hence, tampering with the data is quite difficult as it is very tough to maintain duplicate records on all the multiple systems.
There are cryptocurrency miners who validate these recorded transactions by solving complex mathematical problems. Anyone can be a miner if he owns a computer with an internet connection. Miner will be paid fees and at some time receive awards. The awards are given to encourage the people to participate in the mining activity.
How to purchase cryptocurrencies
The cryptocurrencies can buy through trading platforms available online which is known as cryptocurrency exchanges. It allows the users to sell, buy or exchange these currencies with regular money or other cryptocurrencies. These trading platforms operate from around the globe. The same currency might trade at a different price on other platforms. There are few organizations which offer the digital currencies for sale through a physical kiosk. Here you can insert the regular cash and in exchange, you will receive the cryptocurrency. However, before you purchase them, do understand about the fees that are charged for the transaction.