All about Cryptocurrencies – How Cryptocurrencies work?

What Is Cryptocurrency Development – How Does It Works

Centuries back, there existed a system called the barter system. The so-called barter system was a practice of exchanging goods for services and vice Versa since there was no scale to measure the value of each goods and services. It was more like a farmer would exchange his crops for service and services are exchanged for goods and so on. Years have been passed, different forms of currencies were introduced and trades revolved around it. Then came banks and currencies backed by the governments, floor prices were fixed for goods and a new method of trading came into existence. Right now, we are on the verge of a revolution, where cryptocurrencies are going to take the next big leap by replacing the fiat currencies.

You may not be very familiar when you hear the term cryptocurrencies. But you will be very aware of the term bitcoin and might be hearing it at least twice a day through various mediums. Bitcoin is nothing but a high potential cryptocurrency valued at USD 8668 at the time of writing this article. This blog deals with various aspects of cryptocurrencies, its future application and how it is intended to change the global economy as a whole.

So, now let us get started and dive deep in to what exactly Cryptocurrencies are.

What are Cryptocurrencies?

Cryptocurrencies are nothing but the new-age digital currencies, which are not just the digital form of fiat currencies backed by centralized authorities or institutions but an autonomous currency backed only by technology and math. They are the focus of the future. They are really disrupting the conventional ways of how a currency should look and perform. Neither any financial institutions control Cryptocurrencies nor has the authority of any governments. No third parties like banks are involved in the trading of a cryptocurrency. It is purely a decentralized system connected to a large network of computers.

Cryptocurrencies are built on Blockchain Technology

Yes, it is leveraging Blockchain technology that the cryptocurrencies are made of. Blockchain technology is a network of computers interlinked without having a centralized server. Every computer in the decentralized network does the job of a server and gives a hacker zero chances of hacking the network. As Blockchain technology is highly transparent and unique, this enhances the authenticity of cryptocurrencies.

How it works – Cryptocurrencies

We have discussed earlier that the technology behind cryptocurrencies is Blockchain. The working principle of Cryptocurrencies is quite interesting. Each transaction on a cryptographic network is saved as a ledger that can neither be edited nor tampered. As a simple example, let us say A transferred X amount of cryptocurrency to B. This transaction remains unauthorized until and unless someone on the network saves this to the public ledger. By doing so, the user will be rewarded with some amount of cryptocurrency. This process is called cryptocurrency mining. Cryptocurrency will be rewarded to the ones who make the transaction record the fastest than others by solving a complex mathematical puzzle. Miners use high-speed computers for mining cryptocurrencies like bitcoin. This increases its popularity thereby skyrocketing its monetary value.

What is a server farm and what it has to do with cryptocurrency?

Leveraging high-speed computers, a miner tries to verify the transactions that happened in a crypto network. This set of high-speed computers can be termed as a server farm and the duty of server farm is to solve complex mathematical puzzles to mine cryptocurrencies. When we hear the term mining, the normal thing comes to our mind is the processes of gold mining, crude oil mining, etc. But mining a cryptocurrency has nothing to do with that and is entirely different from every other mining we have heard until now.

How is Cryptocurrency exchanges associated with Cryptocurrencies?

For a user to buy or sell cryptocurrency for physical good or fiat currency, he has to make use of a cryptocurrency exchange. The primary function of an exchange is to act as a marketplace for both cryptocurrency buyers and sellers. Exchanges are usually linked to bank accounts leveraging which transactions can be done. A user has to create an account with an exchange to make crypto trades. He has to go through a multitude of the verification process for the same. As of now, there are several cryptocurrency exchanges available in the market which offer high-end services for the traders.

Properties of Cryptocurrencies

· Completely Decentralized

As cryptocurrencies are built upon the Blockchain technology, it does not have any specific server and remains decentralized.

· No third party involvements

Transactions of cryptocurrencies can be done without any involvement of third parties like banks or any other financial institutions. This helps the traders in saving huge amounts of money that need to pay as commissions and brokerages otherwise.

· Free from hackers

Cryptocurrencies are highly secure and free from malwares. This prevents hackers from entering the system.

· Completely digital

The main property of cryptocurrency is that right from its mining to trading and transactions, every process is done digitally.

· Anonymous

The real identity of a trader is kept anonymous and it will always be. This helps users in protecting their data privacy.

· Limited Availability

The availability of Cryptocurrencies is highly limited and the rate of mining is in a controlled manner. That means a user can’t mine a cryptocurrency beyond its available mining rate. This is a clear indication that the availability of existing cryptocurrencies will be completely null at some point in time.

· Increasing monetary value

Unless fiat currencies, the monetary value of cryptocurrencies is not constant. It will vary based on its demand. Skyrocketing value of bitcoin and various other cryptos like ripple, litecoin, etc is a live example of this.

Why Cryptocurrencies are the future?

As of now, at least some of the countries are limited to the usage of cryptos. But it is no doubt that the future of Cryptocurrencies are bright and pleasant. By having a deep understanding of its true potential, even the government bodies started to invest heavily in cryptocurrency development and research programs which add more authenticity to it. It is expected that cryptocurrencies will be in the mainstream financial institutions within no means of time. Many consider cryptocurrencies as a potential investment tool as well.

Conclusion – Best Blockchain and Crytpo currency app Development Company

If you are looking forward to developing Blockchain solutions like cryptocurrencies and cryptocurrency exchanges, hire DxMinds Innovation Labs, the popular and leading Blockchain app development company across the globe. In-depth knowledge and hands-on experience in various Blockchain technologies help DxMinds in delivering the best services for you. For more details: info@dxminds.com