Cryptocurrency: what it is in simple words, how it works, possible prospects

Cryptocurrency has recently become very popular in the media, it is not mentioned except for the lazy. Some brag about earning on the growth of the rate, others call it a «bubble». But in any case, cryptocurrency is gradually entering people's everyday life. Already now there are stores that accept payment with this means of payment.

What is cryptocurrency?

Cryptocurrency is virtual or digital decentralized money. In this definition, everything is clear to the average user, except for the term «decentralization». It means the absence of any administration: internal or external. That is, thanks to this property, tax services, banks and other government agencies can not regulate and monitor the operations of cryptocurrency owners.

But the question then arises: who issues cryptocurrency? If the Central Bank prints paper money, then cryptocurrency is mined. This process is inextricably linked to blockchain and decentralization. A blockchain is a specially created «archive» that includes blocks in a specific sequence. These blocks contain information about all transactions within the cryptocurrency.

At the same time, each block of the blockchain contains the hash sum of the previous blocks. Due to this, if the previous blocks are changed, the hash sum of the subsequent blocks will no longer match. This means that the block will be invalid. Given that the blockchain is simultaneously stored by all cryptocurrency owners, it is impossible to hack it or change its structure in any way. It is precisely because of the impossibility of controlling transactions that many people speak negatively about this system.

Mining is the process of creating this or that cryptocurrency. The point is to find and sign new blocks for the blockchain. For this purpose, a random number matching program is used. Once the miner finds a matching number, he creates a new block. For this, he receives a monetary reward in crypto. The speed of mining depends on the conditions and the number and power of the computers used.

Positive sides of cryptocurrency

Advantages of cryptocurrency:

• It is impossible to steal these means of payment. In theory, this is only possible if you know the private key. Without it, there is no way to take someone else's money, so this information is kept secret.
• Small commissions when paying with cryptocurrency. Even for a multimillion-dollar transfer to another country, an additional 0 to 5 dollars will be taken.
• There is no central server in the blockchain system. So, you can not be afraid of its hacking or disabling, which significantly increases the safety of personal funds.

What you can use cryptocurrency for

Like any other money, cryptocurrency can be used to pay for goods and services. Its main advantages are the lack of control and minimal commissions. If desired, the money transfer can be made completely anonymous. Also, cryptocurrency is an excellent means for long-term investment. You can buy some coins and wait for their rate to grow. But you can also make a mistake, as with any other investment.

Another feature of cryptocurrency is volatility. That is, jumps in price by 5-6% per day for crypto are absolutely normal. And for many people, this may seem risky. But some cryptocurrency specialists make money on these one-day jumps exactly, using the services of crypto exchanges. Therefore, volatility is another way to make money on crypto, albeit a very risky one.

Cryptocurrency is virtual money that has some interesting properties. For example, they are volatile, decentralized, do not have a central server and are tied to the blockchain. Crypto is created through mining, a process of randomly selecting numbers that will fit certain conditions. Cryptocurrency can be purchased on a cryptocurrency exchange, exchangers. it is stored on electronic cryptocurrency wallets.