What is cryptocurrency?
Cryptocurrency is a digital, decentralized currency that is secured by cryptography and does not require central banks or third parties. It is built on the blockchain, a decentralized ledger implemented by a distributed network of computers. Every time the cryptocurrency is bought or sold, the transaction is added to the blockchain, which is a public database of transactions open to other crypto holders. There is a digital verification process to verify transactions added to the blockchain.
How is cryptocyrrency generated?
Cryptocurrency uses blockchain technology. The production of cryptocurrency is created through a process called mining. Cryptocurrency mining happens when multiple users produce units. Mining is the process of verifying cryptocurrency transactions and creating new cryptocurrencies. Miners are called miners. Cryptocurrency miners try to decrypt the complex mathematical problems of the block containing the transaction information. After the block is decrypted, the block is added to the chain. As the cryptocurrency gets closer to the upper limit in its production, the math problems start to get harder. In addition to verifying the transaction, the blockchain also contains information about who sent how much and on what date. Powerful computer hardware and software are used in this process.
How is cryptocurrency stored?
After purchasing cryptocurrencies, it is necessary to store them securely to protect them from theft. Cryptocurrencies are stored in cryptocurrency wallets, which are physical devices or online software. The terms “Hot wallet” and “Cold wallet” are used for wallets.
Hot wallet: They use online software to protect the private keys of cryptocurrencies. It is connected to the Internet and may be vulnerable to online attacks.
Cold wallet: Unlike hot wallets, cold wallets rely on offline electronics to securely store your private keys. It is usually not connected to the internet, so it can be considered more secure, but less useful.
Cryptocurrency advantages and disadvantages:
Advantages:
Sending a cryptocurrency from one account to another is usually a quick and simple process. Sending between digital wallets is possible using only a smartphone or computer.
–Time and place are unimportant when sending cryptocurrencies. Sending money is always available without any restrictions.
–The cost of using cryptocurrencies is significantly lower than using traditional financial institutions.
–Cryptocurrency uses blockchain technology that uses encryption for secure transactions. Since your cryptocurrency wallet has a private key, there is no possibility of stealing money from your wallet.
Disadvantages:
— You do not have the opportunity to object to the transactions made. If you accidentally send someone cryptocurrency, you cannot undo it. The only way to get the money back is if the other party sends the money back to you.
— The cryptocurrency market is highly volatile. Investing in cryptocurrency can be risky. Because it is not known whether an investment made at that moment is a good investment or not due to the fluctuations in the market.
— If you lose your private key of your crypto wallet, you will not have access to your funds. The money in it cannot be recovered. In order to avoid such a situation, it is necessary to back up your private key in more than one place.
