What is cryptocurrency and how it works
Cryptocurrency has changed the financial world by offering a new way of looking at money and transactions. In this article, we'll break down what cryptocurrency is and how it works - for those who are still new to the topic.
What is cryptocurrency
Cryptocurrency is digital or virtual money that can be settled over the internet. Unlike conventional fiat money, which is controlled by banks, cryptocurrency is decentralized and is not linked to any government or payment system. This means that you can pay with cryptocurrency directly, without intermediaries.
Security and transparency of cryptocurrency
Cryptocurrency is based on blockchain technology. It is a database consisting of a chain of blocks, in which information about transactions is stored (it is also called a ledger). It is impossible to forge blockchain records because they are protected by an encryption system (hence the name "cryptocurrency"), where any, even the most minimal change in one block entails a change in the entire chain (because each block contains information about two neighboring blocks). This ensures transparency and security of the system: anyone can see the information, but no one can change or delete it.
How cryptocurrency works
Cryptocurrency is stored in digital wallets. And every time you make a transfer from one wallet to another, a record is created. A network of computers checks that record to make sure you actually have that money, and if everything checks out, the record is added to the blockchain.
The entire process is powered by mining - the mathematical calculations of computers that generate new blocks of the blockchain. When a payment is made, a commission - the "network fee" - is paid to the miners.
The main cryptocurrencies
Today, there are more than 14 thousand cryptocurrencies in the world. They come in the form of coins (which work on the basis of a separate blockchain), and tokens (cryptocurrencies that work on the basis of the network of another coin). The most famous are Bitcoin, Etherium, Thron, Tether, Binance coin and others.
Benefits of cryptocurrencies
So, let's summarize and list the main advantages that cryptocurrencies offer:
Speed and cost of transfers: Sending cryptocurrency takes minutes and costs much less than bank transfers.
- Accessibility and Independence: cryptocurrencies are available to anyone with an internet connection, regardless of location, plus, since settlements are direct, they don't require third-party involvement.
- Globality: cryptocurrencies eliminate the complexities of cross-border transfers.
- Security: cryptocurrencies are securely protected by cryptographic methods.
- No chargebacks: what is recorded on the blockchain cannot be changed.
- Transparency: you can always verify your transactions and those of your counterparty on the blockchain.
Given the speed of spread and advantages of cryptocurrencies, they will soon become a common form of payment, and along with a regular wallet, every person will have a digital one for cryptocurrency.
The use of cryptocurrencies for accepting payments in business will grow at the same pace, and if you want to start now, try the BucksBus crypto payment solution.