Cryptocurrencies operate through a decentralized technology called blockchain, which serves as a distributed ledger recording all transactions across a network of computers. When someone initiates a cryptocurrency transaction, it gets broadcasted to the network, where it awaits validation.
Miners, special nodes in the network, compete to validate and bundle transactions into blocks using complex cryptographic algorithms. Once a miner successfully solves the algorithmic puzzle, they add the block to the blockchain. This process, known as mining, requires significant computational power and ensures the security and integrity of the network.
Each block contains a unique cryptographic hash, linking it to the previous block, creating a chronological chain of transactions. This immutable and transparent nature of the blockchain prevents tampering and ensures trust in the system.
Participants in the network hold cryptographic keys, consisting of a public key (address) and a private key (password), which they use to securely send and receive cryptocurrencies. Transactions are verified and recorded on the blockchain, providing a transparent and decentralized ledger accessible to anyone.
Cryptocurrencies derive their value from factors such as scarcity, utility, and market demand. Their decentralized nature, combined with blockchain technology, enables peer-to-peer transactions without the need for intermediaries like banks, revolutionizing the way we think about money and finance.
