Saturday 11 November 2017

How Cryptocurrencies work?

bitcoin


The source codes and technical controls that support power and secure cryptocurrencies are highly complex. However, laypeople are more than capable of understanding the basic concepts and becoming informed cryptocurrency users

Functionally, most cryptocurrencies are variations on Bitcoin, the first widely used crypto currency. Like traditional currencies, cryptocurrencies’ express value in units – for instance, you say “I have 2.5 Bitcoin,” Just as you’d, “I have $2.50.”

Several concepts govern cryptocurrencies’ values, securities, and integrity.

   
     1. Block Chain


A Cryptocurrencie’s block chain is the master ledger that records and stored all prior transactions and activity, validating ownership of all units of the currency at any given point in time. As the record of the cryptocurrencies entire transaction history to date, a block chain has finite length – containing a finite number of transaction – that increases over time.
Identical copies of the block chain are stored in every node of the crypto currencies software network- the network of decentralized server farms , run by computer- savvy individual or groups of individuals known as miners who continually record and authenticate crypto currencies transactions.
A cryptocurrencies transaction technically isn’t finalized until it’s added to the block chain, which usually occurs within minutes. Once the transaction is finalized, it’s usually irreversible – unlike traditional payment processors, such as payment and credit cards, most cryptocurrencies have no built in refund or chargeback functions, though some newer cryptocurrencies have rudimentary refund features.
During the lag time between the transaction’s initiation and finalisation, the units aren’t available or use by either party. The block chain thus prevents double-spending, of the manipulation of cryptocurrency code to allow the same currency units to be duplicated and sent to multiple recipients


  2. Private Keys


Every Cryptocurrency holder has a private key that authenticates their identity and allows them to exchange units. Users can make up their own private keys, which are formatted as whole numbers between 1 and 78 digits long, or use a random number generator to create one. Once they a key, they can obtain and spend cryptocurrency. Without the key, the holder can’t spend or convert their cryptocurrency – rendering their holding worthless unless and until the key is recovered

While this is a critical security feature that reduces theft and unauthorized use, it’s also draconian – losing your private key is the digital equivalent of throwing a wad of cash into a trash incinerator. While you can create another private key and start accumulating cryptocurrency again, you can’t recover the holding protected by your old, lost key.


1 comment:

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