WHAT IS CRYPTOCURRENCY
Cryptocurrency - is a virtual (digital) money, which has no physical form and exist solely in electronic form. The unique character of such money consists in that all financial transactions (exchange, international transfers, purchases, sales, etc.) are carried out without the participation of intermediaries: banks, financial and credit organizations, currency exchange offices and even without the control of state authorities. In addition, the system is totally anonymous, it is impossible to monitor the participants of transactions and the chain of financial transactions.
The term “cryptocurrency” was used in 2008, when the first electronic money Bitcoin appeared. Purchase/sale of bitcoins is executed by use of 32-digit code that is part of a consecutive chain of blocks. This structure ensures the safety of the system and the impossibility of breaking the wallets of users. A few years after its launch, bitcoin started to gain popularity. As the result, today there are more than 1000 different cryptocurrencies, which number is growing every year. However, what does make a cryptocurrency so unique?
Features of cryptocurrency
Decentralization. Cryptocurrency is a fully decentralized system that does not depend on any financial institutions nor from the state. The whole structure consists of many personal computers around the world that form a large information network.
Anonymity. Storage, exchange, sale or purchase of cryptocurrency is completely anonymous information. No one can monitor participants of the transaction.
Availability. All the operations with cryptocurrency may be held by anyone without any permission. Unlike banks and exchange offices, transactions are executed very quickly and for a small fee.
Security. Thanks to “the blockchain” virtual currency is protected. The block system is organized in such way that all transactions are carried out in chain order, consistently recording data stored on numerous computers.
WHAT IS BLOCKCHAIN
Blockchain is a decentralized, secure innovative technology, which is a chain of blocks with the encrypted information. The peculiarity of this technology consists in that the storage base is not connected to a common centralized server and is stored on users' computers around the world. The entire base consists of a chain of blocks. Each block contains information about transactions with time and a link to the previous block. Due to this sequential structure, the scammers will not be able to get the information encoded in these blocks. All their attempts are blocked at the stage of formation of blocks called mining. Today, the blockchain technology is not only used in the creation and distribution of cryptocurrencies, it is widely used in various sectors of human life and activity: remittances, sales/purchase of goods and services, receiving/sending documents and securities, conducting safe operations and transactions. According to experts in the field of technology, the blockchain is a revolutionary system that is still in the stage of formation.
How does the blockchain work
1 User 1 wants to transfer the funds to the User 2.
2 Information enters the blockchain network and goes to the block.
3 Block is sent to all users of the blokchain system for verification.
4 The blockchain of each user records a new block to the database.
5 The block joins a chain of other blocks with transactions.
6 Control of the correctness of operations sequence and completion of the transaction.
WHAT IS MINING
Mining (mining) is the process of obtaining cryptocoins using computational operations on the basis of the capacity of computers. In other words, it is production of new blocks for the new transactions. In order to create them the miners are needed; miners are users or group of users using powerful computers for creation of new chains in return of the reward of cryptocurrency. For more profits entire "farms" of electronic money production are created. But the system of production of electronic currencies is organized in such a way that due to the limited number of calculated blocks, “mining” becomes more complicated and less profitable every year. Today, many miners of digital money switch to the next stage called cloud mining. Its peculiarity consists in the fact that all the necessary hardware and computing power are provided by large companies and data centers in the lease. This reduces the cost and equipment maintenance, thereby reducing the cost of the miner.
Creation of crypto wallet for further payments and transactions.
The installation of the software and the hardware adjustment for computations and transactions.
Remuneration in the form of cryptocurrencies in the case of the successful solution of mathematical problems.