Here, I will show you a rundown of cryptocurrency and blockchain technology.
While many people are familiar with the terms crypto and cryptocurrency trading, the technologies involved and the mechanisms for how to processes work are often misunderstood.
Whether you are an active cryptocurrency trader or simply interested in learning more, understanding the rundown of cryptocurrency and blockchain technology is essential. This guide is here to help you better understand what technologies are used in cryptocurrencies and blockchains.
Table of Contents
What Is Blockchain Technology?
A blockchain is a form of a decentralized ledger that stores all transactions and tracks assets across a peer-to-peer network. A blockchain acts as a form of database that stores information electronically.
Blockchains play a vital role in cryptocurrencies such as Bitcoin, as they maintain a secure and decentralized record of transactions.
What makes blockchain technology so different from traditional databases is the way that it is structured.
A blockchain collects information together into groups, which are known as blocks. These blocks have a certain level of storage capacity. Once the blocks are filled, they are then closed and connected to the previous block, forming a data chain.
Other Technologies To Know
Some other technical terms that you will likely encounter when you enter the world of cryptocurrency trading are listed below:
Your wallet is the location where you will store your cryptocurrency holdings. Wallets are either hot, which is online and software-based, or cold, which is offline, stored on your device.
- A Smart Contract
This is an algorithmic program that enacts a contract automatically based on a code.
- A Private Key
This is an encrypted code that will allow you to directly access your cryptocurrency.
- A Public Key
A public key is a name for your wallet’s address that acts like a bank account number, allowing you to share your information with others so you can send or receive cryptocurrencies.
This is the name of a computer that connects to a blockchain network.
This is the unique string of numbers and letters that identify blocks that are then connected to cryptocurrency buyers and sellers.
An exchange is a digital marketplace location where cryptocurrency traders will buy and sell cryptocurrency. Exchanges can also be used to find out more information about the history and standing of a cryptocurrency. For example, you access OKX’s Ethereum live price charts to gain more knowledge about your trading opportunities.
- Decentralized Applications
Decentralized applications, otherwise known as DApps, will exist on a blockchain with the purpose of allowing users to carry out actions without any intermediaries.
The majority of cryptocurrencies out there exist without backing from a central bank or government. Instead, cryptocurrencies exist with the help of a decentralized technology known as blockchains.
Not only do cryptocurrencies not have the banking of physical banks, but they also exist without the need for physical notes or coins. Instead, cryptocurrencies exist online as virtual tokens that can be boarded or sold for different values depending on the market forces.
A cryptocurrency is formed with the use of a process that is known as mining. Mining involves using the computer processing power to solve a series of complex mathematical problems to earn coins which is both resources and time intensive. The only legal way to obtain a cryptocurrency other than mining is to buy the currency.