How Does Cryptocurrency Works?
Cryptocurrency is a kind of digital medium that is used for any kind of transaction or exchange in the market and it uses encrypted software so that all transactions are carried out with full security. Those who use the network, they oversee this market, based on the rules that have been coded in the algorithm. This kind of transaction is a peer-to-peer operation and transparent in nature just like the file sharing protocol Bit Torrent. The coins which are generated through the process of mining those are kept in specially designed wallets that are protected by passwords. These coins can be transferred from one wallet to another. After getting verified by the process of mining this transactions get appended to the block chain.
There are generally some limitations on the number of coins that are to be generated within a certain period of time. Generally the generation process of the coins is quite rapid at the beginning of the process but progressively gets slower. To control the generation of coins as well as verify transactions, the system of cryptography (AKA encryption) is used. The circulation of such type of currencies is controlled by the government. The source code of the generation and transaction of these coins are open. So a third party can regulate the creation of these coins. It mainly relies on the peer-to-peer networks over the internet and is controlled by code.
2. How are Cryptocurrencies propagated?
Based on the mathematical formula, the cryptocurrency are mined or created. The computers which solve complex mathematical problems in the mining process are rewarded with virtual coinage. As the time passes, the mathematical problems become more and more difficult and thus automatically the supply of these cryptocurrency units slows down.