Chapter 3. How do Cryptocurrencies work?
Cryptocurrencies work using a technology called blockchain. Blockchain is a set of records that is stored on many computers around the world. Each record contains information about which transactions were made with cryptocurrency.
Imagine that you have a box of cubes. Each cube contains information about the transaction. When you want to send a cryptocurrency, you take one of the dice and add new information about the transaction. Then you close the cube and mail it to another person.
When this person receives a cube, he adds it to his box of cubes. All the people who store cryptocurrency have their own boxes with cubes that they can update and check to make sure that all transactions have been executed correctly.
In other words, when you send a cryptocurrency, your transaction is added to a block, which is then added to the chain of other blocks. This chain of blocks is called a blockchain. Each block contains a unique code that helps protect the blockchain from fraud and unauthorized access.
In addition, cryptocurrencies do not have a central governing body, such as a government or a bank. Instead, they work on the basis of a decentralized network, where network participants interact with each other directly, without intermediaries.
This makes cryptocurrencies more independent and secure, as they do not depend on a single management node, which can become the target of cyber-attacks.
Here’s how cryptocurrencies work in short. I hope this helped you understand the basics of cryptocurrency!