At present the volume of operations of these currencies is of billions of euros every day. Forbes magazine, this week has published the first ranking of the richest people in the world, basing their fortune on Cryptocurrencies, the Chryto Rich list, but what are these coins really? Continue reading this article and I’ll try to explain it easily.
Any other type of currency, such as the euro or the dollar, are represented by coins and tangible notes that allow exchanges with them. Instead of this, Cryptocurrencies only exist virtually, although they have an exchange value with respect to other currencies.
To understand the operation of a cryptocurrency we must know what Blockchain is, which can be summarized as the annotation book where all the operations in cryptocurrencies are recorded.
02/15/2018: “Person A”: Has 5 Cryptocurrencies
02/16/2018: “Person A”: give to Person B, 3 Cryptocurrencies.
02/16/2018: “Person B”: Has 3 Cryptocurrencies.
02/16/2018: “Person A”: Has 2 Cryptocurrencies.
The particularity of this book of annotations is that it is decentralized, that is, there are copies of it, in thousands of computers and to make a new annotation, thousands of computers have to agree on it.
The Cryptocurrency holders in the Blockchain are not registered by name, but are represented by a key, which is public. You are the owner of that public key if you also have the private key associated with this public key.
Imagine that the public key is a combination of letters and numbers: ASK2J39FJF39283 and that this key has a password associated with it (private key).
The public key is known as Wallet.
We can pay for goods and services with Cryptocurrencies if they are accepted by the other party. If we want to exchange our Cryptocurrencies for another currency, we can go to an “Exchange“. These are places that can guard our Wallet and that can also exchange our Cryptocurrencies for other currencies.
By other way, people who have a copy of Blockchain in their computers and that validate all the operations that are being registered are called “Miners“. A Cryptocurrency is more secure the more Miners exist in it. The computers of the Miners perform millions of mathematical calculations to validate the operations. In addition, the system rewards the Miner who records the operation, with new Cryptocurrencies, that is, that these Cryptocurrencies are added to the Miner’s Wallet, therefore, they have a double function, on the one hand validate operations and at the same time generate new Cryptocurrencies.
If you are interested in more information, soon I will publish new more detailed articles of each one of the figures involved in the Cryptocurrencies.