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Unlike traditional money, cryptocurrency does not have physical equivalence. At the same time, you still may use cryptocurrency to pay for some services and items. Cryptocurrency investment is the new gold rush today. Should we trust it? How do cryptocurrencies work?
How cryptocurrency works
The cryptocurrency process can be explained in three words: transactions, blockchain, and mining. To make transactions, you need a digital wallet that stores crypto. While the payments in crypto aren’t regulated by any financial institution, they are transferred directly from person to person. All this happens thanks to blockchain. Simply put, blockchain is a database where all transactions are saved. Once the transaction is made, it can’t be removed from this record. And Why is it important to store and safeguard your private key?
Here is another important detail: blockchain isn’t located in any specific place. It is decentralized across the world to ensure safety and security.
Finally, mining is the process of producing the cryptographic codes that are essential for every transaction.
Crypto and money: what are the differences?
- This is one of the most significant features of crypto as the transactions are anonymous. No one knows who you are, and there is no need to provide personal info to buy or sell cryptocurrency. We can’t say the same about the banking system.
- Unlike cash or credit cards, cryptocurrencies are decentralized. However, this fact doesn’t mean that there are no rules in the crypto world. The cryptocurrency community establishes the rules on its own.
- Cryptocurrency uses encryption to verify transactions. You receive a unique private key, which is impossible to hack.
- Transactions in the crypto world are designed to be irreversible. It is a key feature of cryptocurrencies. No one can block your digital wallet or cancel your transactions. The exchange is carried out without any go-betweens that’s why the operations are quick and have low commissions.
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