What is cryptocurrency and how is it used?

Have you ever heard of cryptocurrencies like Bitcoin, Ethereum, or Ripple? Do you know what is cryptocurrency and how does it work? If no, then this article is for you, because we will learn everything you need to start using cryptocurrency.

What is cryptocurrency?

You have probably heard of cryptocurrency like Bitcoin, right? Cryptocurrency is not like money you spend every day. You can't physically take it or see it, but you can spend it, trade it and even mine it. Maby it sounds crazy, but yes - you can mine cryptocurrency (you can read an article about cryptocurrency mining if you want to start mining it - Cryptocurrency mining - is it worth it?

Cryptocurrencies are called CRYPTOcurrencies because the consensus-keeping process is secured by strong cryptography.
Cryptocurrencies use decentralized control as opposed to centralized electronic money.
Digital money encryption techniques are used to regulate its use and generate its release. Cryptocurrency is not regulated or controlled by any bank, government or centralized financial authorities.

How does Cryptocurrency work?

All cryptocurrencies rely on the power of the Internet to guarantee its value and confirm transactions. Cryptocurrency users on a network verify every single transaction, and those transactions then become a matter of public record. This prevents the same digital currency or coin from being spent twice by the same person.
To track purchases and transfers, cryptocurrencies are associated with the internet that uses cryptography, the process of converting legible information into an almost uncrackable code.

To store any cryptocurrency, you need to have cryptocurrency wallet (you can read What is cryptocurrency wallet? and How safe and secure are cryptocurrency wallets?). All cryptocurrency transactions are sent between peers from cryptocurrency wallets using private and public keys. Those transactions are recorded on a public ledger of transactions called a blockchain (you can read our article about blockchain - Blockchain explained - why you should care). Blockchain - A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. The transactions amounts are public, but senders transactions are encrypted. Each transaction leads to the digital money wallet. Anyone who owns cryptocurrency key or password to the wallet owns the amount of cryptocurrency denoted on the ledger. When someone sends or receives cryptocurrency, when they send from one wallet to another wallet using a set of private and public passwords, that transaction is queued up to be added to the ledger. Many transactions are added to a ledger at once. These “blocks” of transactions are added sequentially. That is why the ledger and the technology behind it are called “block” “chain.” It is a “chain” of “blocks” of transactions.

Encryption - the process of encoding a message (information) in such a way that only authorized parties can access it. In encryption, the message is encrypted using encryption algorithm and can be read only if decrypted.

Decryption - the reverse process of converting encoded data to its original un-encoded form, plaintext.

How can I use digital money?

Cryptocurrency mining
As mentioned before - cryptocurrencies can be mined.
Digital Money mining is a validation of transactions and for that miners get digital money as a reward. These rewards decrease transaction fees. To speed up the rate of generating hashes, which validates all transactions, it uses specialized machines which are used by miners. These machines are doing the work that we all know as mining. So easy explanation would be: miners are using specialized machines to mine (validate transactions) and getting rewarded with digital money.

At first, there is a miner who invests his time and computer space that runs essentially 24/7 and it does a process that is called "verifying transactions".
To create a block it has to be accompanied by a cryptographic hash that fulfills certain requirements, so with help of miners computer, network solves mathematical intensive computations regularly to find the blocks using specific data mining algorithm - set of heuristics and calculations that create a model from data-, for example - Naive Bayes, until it hits upon the right hash. Then miner submits his solution to the currency issuer and after hash verification, miner gets his reward of given number of coins. "Verifying transactions" process repeats on and on. This system is called “proof of work” and you can guess what does it mean - you do the work and you get paid for it. Bitcoin, Litecoin, and most other digital currencies use "Proof of work" system.

Cryptocurrency trading
Digital money trading, or cryptocurrency trading, is simply the exchange of cryptocurrencies. Like in Forex, you can also buy and sell a cryptocurrency for another, like Bitcoin or altcoin for USD and Euro. This is one way of getting involved in the world of cryptocurrencies without having to mine it.
Here are some cryptocurrency trading platforms, you can check:

• https://www.binance.com/register.html?ref=10995289
• https://cex.io/
• https://bitflyer.com/en-us/?finder
• https://www.kucoin.com/#/?r=1xf56
• https://www.coinbase.com/?r=59acd7d90671d102e1c321dd
• https://www.coinspot.com.au/?affiliate=C0EPJ
• https://bitit.io/?referral=CCWRHBMA
• https://localbitcoins.com/
• https://indacoin.com/en_DE/change/buy-bitcoin-with-cardusd
• https://www.coinmama.com/

Also, you can spend your digital money
By using the digital money to pay for goods online can cost you less in fees and bring you actual discounts. It can be challenging to find good online stores that allow you to pay with cryptocurrency, but here are some of them:

• https://spendabit.co/
• https://coinmap.org/welcome/
• http://spendbitcoins.com/

What will you do with your cryptocurrency?

Sources:
https://www.natureforex.com/what-is-crypto-trading/
https://cryptocurrencyfacts.com/how-to-trade-cryptocurrency-for-beginners/
https://cryptocurrencyfacts.com/how-does-cryptocurrency-work-for-beginners/
https://cryptocurrencyfacts.com/how-does-cryptocurrency-work-2/
https://en.wikipedia.org/wiki/Cryptocurrency
https://blockgeeks.com/guides/what-is-cryptocurrency/
https://www.investopedia.com/terms/c/cryptocurrency.asp