How Does Cryptocurrency Work?
All types of Cryptocurrency were developed as an application on top of a cryptographic invention known as blockchain, hence the name cryptocurrency. Blockchain is a technology that will support multiple technologies – cryptocurrency is just one of them. Cryptocurrency, as we have it today, would not be possible without the blockchain technology. So, what is blockchain?
A blockchain is a digitized, decentralized, public ledger of all cryptocurrency transactions. Constantly growing as ‘completed’ blocks (the most recent transactions) are recorded and added to it in chronological order, it allows market participants to keep track of digital currency transactions without central record keeping. Each node (a computer connected to the network) gets a copy of the blockchain, which is downloaded automatically.
Originally developed as the accounting method for the virtual currency Bitcoin, blockchains – which use what’s known as distributed ledger technology (DLT) – are appearing in a variety of commercial applications today. Currently, the technology is primarily used to verify transactions, within digital currencies though it is possible to digitize, code and insert practically any document into the blockchain. This creates an indelible record that cannot be changed; furthermore, the record’s authenticity can be verified by the entire community using the blockchain instead of a single centralized authority.
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