How Cryptocurrency is made?

Question

As a cryptocurrency enthusiast from the UK, I am keen to know everything about it and basically about how cryptocurrency is made and what are they made of?

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Moris Johnsons 3 months 1 Answer 35 views 0

Answer ( 1 )

  1. Cryptocurrency is software. Every function from how transactions are recorded, to how data is stored, is dictated by code.

    Especially for cryptocurrencies whose main function is to act as money, cryptocurrency transactions are typically stored in a type of database known as a blockchain (other cryptos use unique technology, but the gist is the same).

    What we think of as cryptocurrency, for example, 1 Bitcoin, is just numbers recorded on a cryptocurrency’s blockchain. Another word for that stand-in for value is “token” (often also called a “coin”).

    Cryptocurrencies are created by algorithms that rely on cryptography. That is why it is called the “crypto” currency. Every transaction relates back to unique cryptographic codes that secure the network.

    Cryptocurrency software is decentralized and distributed, meaning it is hosted on many peoples’ computers across the world instead of just on one server by one company.

    The algorithms generally are written to award coins to computers who add transactions to the blockchain. The process of adding transactions to the blockchain is known as mining.

    The code of the cryptocurrency defines things like maximum supply, mining rewards, etc.

    Thus, for most cryptocurrencies, the main way new coins are created is by people all over the world running hardware that adds transactions to the blockchain. Otherwise, cryptocurrency tokens are created by other mechanisms contained in a cryptocurrency’s software.

    Lastly, the code for almost all cryptocurrencies is public, so anyone can check how coins are created.

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