What is Cryptocurrency and How Does It Work?

Cryptocurrency is a digital currency that, unlike traditional currencies, is traded in an encrypted manner. This encryption was developed to ensure that cryptocurrencies, designed as a medium of exchange that can replace cash, are secure and verifiable. You can transfer value over the internet with crypto currencies, whenever you want, wherever you want, to anyone you want.
Cryptocurrencies are digital assets that are not regulated by a central authority. So no one prints or controls it. It operates on a free and open network between computers. This network uses a technology called blockchain, which is a publicly visible database that keeps track of cryptocurrencies. Blockchain ensures that cryptocurrencies are protected against counterfeiting. To own cryptocurrencies, it is enough to join this network and create a crypto wallet.

How is Cryptocurrency Produced and How Does It Work?

Cryptocurrency production occurs through a process called mining. Mining is a function that ensures the operation of the cryptocurrency network and creates new cryptocurrencies. Miners solve complex mathematical problems using networked computers and save them in a distributed database called blockchain. Distributed system is where more than one computer or server communicates with each other and works with each other by forming a network whole.
 

You can think of the blockchain as a publicly visible ledger where cryptocurrency transactions are kept. Miners ensure the security of the network by creating new blocks on this chain and thus earn new cryptocurrencies.

 

The functioning of cryptocurrency can be summarized as follows: When a user wants to send cryptocurrency to another user, he confirms this transaction with his digital signature and transmits it to the network. Miners on the network also start working to verify this transaction. The confirmed transaction is added to the blockchain and completed between the sender and the receiver. During this process, the sender and receiver only use their own wallet addresses and do not share personal information. This is one of the privacy advantages of cryptocurrency.

What are the Features of Cryptocurrency?

Decentralization: Cryptocurrencies operate on distributed networks that are not dependent on any central authority. In this way, it provides the opportunity to make direct transactions between users.

Transparency: The blockchain where cryptocurrencies are recorded can be viewed and audited by anyone.

Security: Cryptocurrencies are protected by cryptographic methods and transactions are confirmed with digital signatures.

Limitation: The production of cryptocurrencies is limited by a predetermined algorithm. Thanks to this limitation, the supply of cryptocurrencies is kept under control.

Flexibility: Cryptocurrencies come in many varieties designed and developed for different purposes. This diversity can offer faster transaction times, lower fees, greater privacy and greater functionality.