How does cryptocurrency work?
Cryptocurrencies run on a distributed public ledger called blockchain, a record of all transactions updated and held by currency holders.
Units of cryptocurrency are created through a process called mining, which involves using computer power to solve complicated mathematical problems that generate coins. Users can also buy the currencies from brokers, then store and spend them using cryptographic wallets.
If you own cryptocurrency, you don’t own anything tangible. What you own is a key that allows you to move a record or a unit of measure from one person to another without a trusted third party.
Although Bitcoin has been around since 2009, cryptocurrencies and applications of blockchain technology are still emerging in financial terms, and more uses are expected in the future. Transactions including bonds, stocks, and other financial assets could eventually be traded using the technology.
Cryptocurrency examples
There are thousands of cryptocurrencies. Some of the best known include:
Bitcoin:
Founded in 2009, Bitcoin was the first cryptocurrency and is still the most commonly traded. The currency was developed by Satoshi Nakamoto – widely believed to be a pseudonym for an individual or group of people whose precise identity remains unknown.
Ethereum:
Developed in 2015, Ethereum is a blockchain platform with its own cryptocurrency, called Ether (ETH) or Ethereum. It is the most popular cryptocurrency after Bitcoin.
Litecoin:
This currency is most similar to bitcoin but has moved more quickly to develop new innovations, including faster payments and processes to allow more transactions.
Ripple:
Ripple is a distributed ledger system that was founded in 2012. Ripple can be used to track different kinds of transactions, not just cryptocurrency. The company behind it has worked with various banks and financial institutions.
Non-Bitcoin cryptocurrencies are collectively known as “altcoins” to distinguish them from the original.
5. 1. Money transfers
Money transfers using blockchain can be less
expensive and faster than using existing money
transfer services. This is especially true of cross-
border transactions, which are often slow and
expensive. Even in the modern U.S. financial
system, money transfers between accounts can
take days, while a blockchain transaction takes
minutes. 5
6. 2.Insurance
Using smart contracts on a blockchain can provide
greater transparency for customers and insurance
providers. Recording all claims on a blockchain
would keep customers from making duplicate claims
for the same event.
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7. 3. Real estate
Real estate transactions require a ton of paperwork to
verify financial information and ownership and then
transfer deeds and titles to new owners. Using
blockchain technology to record real estate
transactions can provide a more secure and accessible
means of verifying and transferring ownership. That
can speed up transactions, reduce paperwork, and
save money.
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8. 4.Secure personal information
Keeping data such as your Social Security number,
date of birth, and other identifying information on a
public ledger (e.g., a blockchain) may actually be more
secure than current systems more susceptible to hacks.
Blockchain technology can be used to secure access to
identifying information while improving access for those
who need it in industries such as healthcare, finance,
and education.
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9. 5.Voting
If personal identity information is held on a blockchain, that
puts us just one step away from also being able to vote
using blockchain technology. Using blockchain technology
can make sure that nobody votes twice, only eligible voters
are able to vote, and votes cannot be tampered with.
What's more, it can increase access to voting by making it
as simple as pressing a few buttons on your smartphone.
At the same time, the cost of running an election would
substantially decrease. 9
10. 6. Artist royalties
Using blockchain technology to track music and film files distributed
over the internet can make sure that artists are paid for their work.
Since blockchain technology was invented to ensure the same file
doesn't exist in more than one place, it can be used to help reduce
piracy. What's more, using a blockchain to track playbacks on
streaming services and a smart contract to distribute payments can
provide greater transparency and the assurance that artists receive
the money they're owed.
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11. 7.Government benefits
Another way to use digital identities stored on a
blockchain is for the administration of government
benefits such as welfare programs, Social Security,
and Medicare. Using blockchain technology could
reduce fraud and the costs of operations.
Meanwhile, beneficiaries can receive funds more
quickly through digital disbursement on the
blockchain.
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12. Design Primitives of Blockchain
Blockchains are secured through a variety of
mechanisms that includes; advanced cryptographic
techniques and mathematical models of behaviour
and decision making.
The cryptographic technology employed by
Blockchain ensured the integrity of transactions.
1.SECURITY
13. •There are blocks in the Blockchain that contains
transactions, and this data structure is called
Blockchain. Each new block is linked to the
previous ones in a cryptographic chain such that,
the data cannot be altered.
•By using consensus mechanism, all transactions
are checked for accuracy and integrity. However,
the Blockchain technology differs in key critical
security features compared to other technologies.
14. 2.PERMISSION
In order to participate in a network, the Blockchain requires
Permission. Open-source clients can connect to the
network in a public Blockchain.
The Ledger copy is provided once the network has
completed the necessary synchronized. Participants in the
Permissioned blockchain must be granted permission
before they can join the network. Both peer-to-peer
networking and internet are covered with the permission
policy.
15. 3.PRIVACY
The network's participant benefits from the privacy
provided by the Blockchain.
Confidentiality and anonymity are part of the privacy
policy. In order to keep the transaction details secret,
confidentiality is required.
