Terms such as bitcoin and cryptocurrency are now familiar to many people. But their exact functioning and practical use are often not entirely clear. For this reason, the following article is dedicated to the subject of cryptocurrencies and explains what this technology consists of.
What is Blockchain?
The hardest term to start with – blockchain. Cryptocurrencies are based on this technology and are the central component of the principle of operation.
At its core, the blockchain is a digital list of data that is constantly being expanded. Each cryptosystem like Bitcoin maintains its own blockchain. A record contains information about a transaction. In doing so, a concatenation with the previous and next data record takes place. Part of the last transaction is inserted into the next one. This ensures that once a block of data has been inserted into the blockchain, it cannot be changed. In addition, the data is stored encrypted in the blockchain. Thus, every transaction that takes place in a cryptocurrency is traceable, anonymous and at the same time immutable.
Experts believe that blockchain is one of the technologies that has the potential to change the world. There are also other areas of application, such as documentation and securing supply chains.
What are cryptocurrencies like bitcoin?
Another frequently asked question is: What is Bitcoin?
Bitcoin is one of many cryptocurrencies. It is the first, but not the only cryptocurrency. There are now, in 2022, almost 10,000 individual and independent cryptocurrencies. Bitcoin is the most famous of them.
Cryptocurrencies like Bitcoin are decentralized and digital currencies. Different systems serve different purposes and are sometimes linked to other functions. Bitcoin is designed as a means of payment with which it is possible to pay for goods and services. No bank or other payment service provider is required, which is one of the advantages of bitcoin.
Moreover, there is no exchange rate, because the value of a bitcoin is global. With these properties, Bitcoin is predestined for international payments. Another characteristic of cryptocurrencies is the fact that transactions are carried out instantly. In this way, digital currencies can be exchanged between two people without waiting.
How can one trade digital currencies or how to pay with crypto?
It is particularly important for understanding cryptocurrencies to know how they are used in practice. In principle, paying with Bitcoin is very simple.
A digital wallet is required to trade cryptocurrencies. This is the digital version of a wallet. In most cases, this is an application that is installed on the smartphone or can also be used in the PC browser.
This digital wallet has a public payment address. This is comparable to the classic account number. In addition, each user has a private key. This is required to send coins.
If a user’s payment address is known, bitcoins, for example, can easily be sent directly to another digital wallet via the app. It works like a transfer. A payment address can also be scanned via a QR code, which makes the process easier.
Who needs cryptocurrencies?
Cryptocurrencies are sometimes called the money of the future. The world is becoming increasingly global, pushing the boundaries of traditional payment systems and currencies. It is not without reason that there are single currencies like the euro, to facilitate international trade for consumers and, above all, for businesses.
It is precisely in this area that the advantages of cryptocurrencies lie.