You’ve probably heard of Bitcoin. You’ve also probably heard of blockchain. But what does it all mean? Let’s start by defining cryptocurrency. A cryptocurrency is a digital, decentralized currency. By decentralized, this means that the value is not managed by a central authority. Why? There are several benefits such as immediate availability of crypto funds.
Why Crypto is so Attractive to Investors
Proponents also praise crypto for the ability to avoid technical failures since the network is decentralized as well. Crypto is hosted on a peer-to-peer computer network that updates simultaneously. This means cryptocurrency users are never without up-to-date service. This movement towards a decentralized currency comes out of the desire to move away from the traditional financial system following the 2008 crash.
How much is Crypto Worth?
So, you may be wondering – how is the currency valued – this is where the blockchain comes in. The blockchain is key to understanding cryptocurrency. The blockchain is the ledger upon which all transactions of a particular cryptocurrency are recorded. Because new additions to the blockchain must be independently verified by each member of the network, the system is highly secured and impervious to forgeries.
How do you Know if the Crypto is Legit?
This process of verifying transactions is as follows. For brevity, let’s use Bitcoin as an example. A Bitcoin holder has a transaction; this transaction is then sent through a hashing algorithm for encryption. After that, it’s sent through a signature algorithm using the Bitcoin holder’s unique private key. The digitally signed, encrypted transaction is output. Next, this is distributed using the user’s public key, and the mining process begins.
How do you Mine for Crypto?
The mining process is when transactions are submitted for verification before being added to blockchain. Cryptocurrencies are mined when a person – or more likely, a company – uses a large-scale data center to solve the complex algorithms which prove no single Bitcoin has been duplicated. In the process, anyone who does this work to verify transactions are paid in new Bitcoin which are generated when the new block is added to the blockchain.
Evolve Bank & Trust does not currently offer any cryptocurrency services.