As novice traders, cryptocurrency is a new thing for them. Cryptocurrency is roughly the equivalent of using PayPal or a Debit Card, except the numbers on the screen represent cryptocurrency instead of fiat currency like a dollar.
New users need to set up a Coinbase account. By using Coinbase, users can buy, sell, send, receive, and store Bitcoin, Bitcoin Cash, Ether, and Litecoin. It provides an all-in-one wallet, broker, and exchange service making them a one-stop-shop for new users.
However, if you want to understand cryptocurrency, you need to understand the concept of digital currency. Theoretically, a cryptocurrency is a digital or virtual currency that is secure by cryptography. It makes nearly impossible to counterfeit or double-spend.
Theoretically, cryptocurrencies are as systems that allow for the secure payments online which are dominated in terms of virtual “tokens”, which are represented by ledger entries internal to the system. “Crypto” refers to the various encryption algorithms and cryptographic techniques that safeguard these entries. These entries are such as elliptical curve encryption, public-private key pairs, and hashing functions.
The transfer is in the form of peers (as there are no middlemen like a bank). Then, digital public ledger (called “blockchain”) records the transactions. Blockchain is an organizational method for ensuring the integrity of transactional data which stands as an essential component of many cryptocurrencies.
How Cryptocurrencies Work
Cryptocurrency wallets are software that sent the transactions between peers. The person creating the transaction by using wallet software to transfer balances from one account to another. To transfer funds, knowledge of password associates with the account. The encryption is in the form of transactions. Then, it broadcasts to the cryptocurrency’s network. After that, it queues up to be added to the public ledger. So, technically, all users can access the ledger if they choose to access it.
The source codes and technical controls that support and secure cryptocurrencies are complex. However, laypeople are more than capable of understanding the basic concepts and becoming informed cryptocurrency users.
Each transaction leads back to a unique set of keys. Whoever owns a set of keys, owns the number of cryptocurrency associates with those keys.
