A Beginner’s Guide – How does Crypto currency work?

Crypto currency works a lot like the debit card and credit card. It allows people to send and receive currency electronically. The only difference between the banking currency (as that of dollars, Euros or Yuan) and the crypto currency is that instead of banks and governments issuing the currency, an algorithm does.

What is crypto currency?

It is the digital currency operating between the peers without a middle men like banks. The transactions are recorded in a public ledger called the block chain. The data in the chain are encrypted using cryptography and hence name crypto currency. It is decentralized. Bitcoin is the most common crypto currencies. There are other crypto currencies like ripple, Ether, Litecoin, altcoins, etc.

How does crypto currency work?

The transactions between the users are made using the software called cryptocurrency wallets. In order to transfer funds, the user needs an ID and a password associated with a registered account. As the user logs in and transfers funds, the broadcast is queued up to be added to the public ledger. Every user has access to the ledger. This means, if the user holds coins in a wallet called Coinbase, he can still use his coins using other software called full node.

Why is crypto currency safe?

The transaction amount is public but not the sender. Each transaction holds a set of keys that point to the sender. This is similar to the bank account number of the sender. These keys are never constant and keep changing. The keys are encrypted as well. They are spread across the ledger. Therefore, one has to have access to multiple accounts in order to hack into an account. Hence, crypto currency is safe

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