Cryptocurrency is a digital payment system that operates independently of banks for verifying transactions. Unlike traditional currencies, it doesn't have a central authority controlling its issuance or regulation. Instead, cryptocurrencies use a decentralized system to record transactions and create new units. This decentralization ensures that transactions involving digital assets are authentic and valid.
The term "cryptocurrency" comes from relying on encryption techniques to secure and protect transactions. Encryption plays a crucial role in providing security and safeguarding the integrity of the system.
Blockchain technology serves as a digital ledger that chronologically records all transaction data related to cryptocurrencies. This ledger, distributed across multiple computers in a peer-to-peer network, stores transaction details. While it may sound simple, maintaining this vast amount of data requires significant computational effort.
Trading in cryptocurrencies involves activities such as buying, selling, or holding digital assets like Bitcoin, Ethereum, or Litecoin with the objective of making a profit.
To clarify some terms:
Fiat: These are centralized currencies like the Euro or U.S. Dollars, which are declared legal tender by government decree.
Decentralized: This term refers to systems or networks that are controlled by multiple local entities rather than a single authority.
Blockchain: It is a system where a record of cryptocurrency transactions is maintained across a network of interconnected computers.
Miners: These are computers that validate transactions on the blockchain by performing complex calculations.
Confirmations: Confirmations are necessary to ensure the successful completion of a transaction.
Address: An address is a unique alphanumeric string assigned to a wallet, used for routing digital assets to specific destinations within the network.