What is Cryptocurrency?

A cryptocurrency is a digital form of currency that relies on cryptography as a security measure, making it difficult to counterfeit and tough to create fraudulent transactions. Technically speaking, cryptocurrency is a string of data or information, called a hash, which has been encrypted and coded to represent a unit of currency.

This type of currency is not issued by any central authority, which is one of its biggest appeals for investors. Theoretically, the value of cryptocurrency cannot be influenced or manipulated by government interference.

How it works?

Simply put, cryptocurrencies are nothing more than restricted entries made to a database. These entries can only be changed when certain conditions are met and are kept secure using mathematical algorithms.

For example, if you want to send Bitcoin to your friend Mufu, you create and send a restricted message into the bitcoin network and “sign” this transaction with a private security key. Once it is received by the peer-to-peer Bitcoin network, it checks your intended transaction with Mufu against its database, to be sure that you haven’t tried to send the exact same Bitcoin to your other friend Sadiku. 

These peers have a record of each transaction made by every account and are often incentivised to keep the database secure by checking entries that are distributed to them. Once the peer-to-peer network confirms that the Bitcoin is available to send, Mufu gets confirmation of the transaction and the Bitcoins are now his.

To be continued...

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