Tech

Explaining the Tech Behind Cryptocurrencies

By Staff Reporter , Jan 08, 2020 06:37 PM EST
(Photo : Unsplash)

Educating the masses about crypto can help them embrace it instead of fearing its use. Here you can learn about the tech behind crypto and understand its benefits.

Cryptocurrencies are slowly shuffling their way into the mainstream with more businesses accepting bitcoin as a form of payment, giving consumers reasons to use them. Different tactics are being used to expose the masses to what cryptocurrencies really are and what they can do. Most of these strategies are used to remove the mystery around crypto and ensure people that using it is not as unsafe as some headlines would lead them to believe.

By making it part of society with notable companies such as KFC, Subway and Microsoft, the everyday person may not view crypto as something to be afraid of anymore. Another way of helping crypto attract more users is by educating them on the technology and processes that make them work. This post is a contribution to that effort.

What Are Cryptocurrencies?

A cryptocurrency is a digital asset that can be exchanged for other digital coins or fiat currencies. They are different to orthodox monies because they are not controlled by a central authority such as a bank or a government.

For this reason, sending crypto around the world does not require verification from a higher authority and therefore is not as costly (because you avoid payment verification fees). This is why sending bitcoin around the world is faster, cheaper and arguably even more secure than sending payments with your bank.

To make a payment with bitcoin, an individual must purchase their bitcoin from an exchange platform and store their bitcoin in a secure bitcoin wallet online. There are many options around including Luno, one of the biggest and safest international exchange and wallet providers within the cryptosphere.

So, What Is the Blockchain?

The blockchain is a word that most people who are new to crypto know already because it is strongly associated with bitcoin. It is true that blockchain technology is what makes bitcoin payments work.

The blockchain is simply a chain of blocks, each block storing information about a payment made with bitcoin. The blockchain is not owned by anyone but is a public ledger that anyone can access - but impossible to change due to complex mathematical equations that constantly change.

A payment between two bitcoin wallet holders is verified and authenticated when the block of information containing that payment is added to the blockchain. The blockchain then takes over the role of a bank. So, who adds the payment to the blockchain?

An Overview of Blockchain Mining

Payments are added to the blockchain through a process of bitcoin mining. Using sophisticated computers and cooling products to stop those computers overheating, people are able to verify payments for other people and add the details to the blockchain.

But why would they do this? This is a good question and the answer is because mining bitcoin comes with a bitcoin reward of its own. In the past, this was a lucrative task for bitcoin miners to make bitcoins easily, but it has now been eaten up by large bitcoin mining farms in China, Scandinavia and Russia.

In Summary

In a nutshell, when you send a payment from your bitcoin wallet, somebody else rather than a bank verifies that payment with their computer solving a mathematical equation (bitcoin mining). This allows peer-to-peer payments with bitcoin to be cheaper and more convenient. The payment is then recorded on the blockchain forever.

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