The world is embraced with digital technologies and Cryptocurrency is the future of money transaction. Let us find out the concept behind how cryptocurrency actual moves in the network. Cryptocurrency runs on the network of public ledger called Blockchain.
What is Cryptocurrency?
Cryptocurrency is virtual money which is produced, stored and transmitted digitally which is a decentralized currency. Decentralized implies it is not issued by any government bank or central authority which makes it free from any control or manipulation. Now a question arises how secure it is because of no involvement of any government identity.
Cryptocurrency uses the technology of Cryptography to make it secure and almost impossible to counterfeit. Cryptocurrency payment connections get secured by complex algorithms comprised of computer science theory and mathematical models. In addition to establishing the secure connection, they also store funds without using personal names or organization logos. They run on the network of public ledger called Blockchain.
Blockchain technology is invented in 2008 to create the digital currency. It enables the storage and mobility of cryptocurrency from one individual to other individuals. The blockchain is formed of blocks which are linked with each other cryptographically.
Blockchain attempts to solve the money transfer between the parties without the third party( Trusted party). The transaction in blockchain is faster and cheaper as there is no involvement of the third party which takes some fee.
Blockchain performs the money transaction by following some principles:
- Open Ledger: It comprised a chain of transactions happening between the parties which are open to the public. The different parties are well aware of how much money in each one has and currently where is the money. The best part of the open ledger is every party can decide whether the transaction is valid or not and upon denial any non-valid transaction will not be the part of past transactions, hence abolished.
- Distributed Ledger: The aim of blockchain is to get rid of the centralized ledger so the ledger is distributed across the wireless nodes. According to this principle, all the participating parties have a node comprised of information about all the money movement and transaction going on individually. Every individual node of the party has to be synchronized with each other in order to share the same copy with each other.
Now the question arises if a non-valid transaction has been made then how to protect it from going to ledger until and unless it gets permission from all the linked parties within the network and the answer is Miners.
- Miners: Miners are the special nodes which have authority to validate the transactions and to place it into the ledger and in exchange, it gets a reward in form of cryptocurrency. The miner performs two task:
- Validation: Minor first validates the transaction by seeing the funds available at parties for a transaction.
- Key: As the blockchain is secured with cryptography the miner has to find the special key to enable the previous transaction to lock it with new transactions. Miner uses strong computers with GPU for performing the task by using computational power and time. The search for the key is random so minor repeatedly search for a key and stop when it finds the first and valid key.Miner than broadcast the solutions and validates the transactions then it’s added to the ledger of each party inside the network.
Bitcoin is the first ever cryptocurrency launched by Satoshi Nakamoto in 2009, since then the community grows exponentially with many developers working on Bitcoin. Along with Bitcoin 700 cryptocurrency are present in the peer to peer network. Some famous cryptocurrencies are Litecoin, Zcash, Dash, Ripple, Ethereum and many more.
The price and value of Bitcoin: It works on Demand and Supply framework, when the demand for Bitcoin increases the price of it increases and vice versa where the supply of Bitcoin decrease exponentially and predictable. As the supply is limited the demand increases and price increases appreciatory.