What is cryptocurrency?
We have been using coin currency or cash and in old times we have also used gold and diamond pearl. Cryptocurrencies are digital tokens and not coins or cash. Cryptocurrency (also known as crypto) is a digital currency designed to serve as a medium of exchange. Crypto is digital money that allows people to pay each other directly through an online system set up to allow peer-to-peer transactions without the need for a bank. Cryptocurrency payments exist purely as digital entries in an online database that describe specific transactions.
Cryptocurrencies came into being after the financial market crisis of 2008 when a need was felt to democratize how currencies were held, exchanged, and regulated. Bitcoin was invented that year by a man named Satoshi Nakamoto. And today many cryptocurrencies exist. For example Litecoin (LTC), Ethereum (ETH), Stellar Lumen (XLM), Bitcoin Satoshi’s Vision (BSV), Electro-Optical System (EOS), etc.
How does cryptocurrency work?
Standard fiat currency rupee, dollar, ruble, etc. are backed and funded by the central bank of a particular country. In contrast, most cryptocurrencies work without the support of a central bank or government. Instead of relying on government guarantees, a decentralized technology called blockchain underpins the operation of cryptocurrencies. (Some coins or cryptocurrencies are also supported and controlled by centralized institutions).
Cryptocurrency uses cryptography techniques to secure and verify transactions as well as control the creation of new units of a particular digital currency.
Many cryptocurrencies are built on blockchain technology, A distributed ledger implemented by a distributed network of computers. Cryptocurrencies are not issued by any central authority or country’s government, making them potentially impervious to government interference or manipulation.
How is a new cryptocurrency made?
Blockchains typically operate through proof-of-work (PoW) or proof-of-stake (PoS) consensus algorithms. PoW works on the basis of miners (mining) often designating specific computing machines for the process. Creating new cryptocurrency from mining is given to the validator (who has a mining setup) on the basis of dividends.
On the other hand, PoS runs on DAO. In a staking system, rewards are distributed for helping run the network by holding assets in certain designated wallets. Many PoS assets also allow master-nodes
A more complex staking process that usually requires a certain minimum number of coins.
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