Facts about cryptocurrency
What is Cryptocurrency?
CRYPTOCURRENCY is a digital currency that doesn’t depend on central banks or trusted third parties to authenticate transactions and create new currency units. Instead, it uses cryptography to validate transactions on public distributed ledger called blockchain.
Due to the fact that it is not like traditional money that we can carry around, cryptocurrency does not depend on banks to verify transactions. There are plenty of them on the market due to how easy it is to create one using Ethereum (ETH) blockchain but the most common one is bitcoin.
How does cryptocurrency work
To make any transaction you need a cryptocurrency wallet for the digital currency, which sorely provides an address for your funds on the blockchain. Blockchain is the technology that allows cryptocurrency to work like a government issued currency and also holds the records of all transactions updated and held by currency holders. For security reasons, since digital currencies can be immutable the cryptocurrency wallet includes private and public keys for secure transactions.
Units of the digital currency are made through a procedure called mining which simply entails the use of a computer to solve complicated mathematical problems that generate coins. When the coins are generated users can access them from brokers and then store and spend them from their wallet. Having a digital coin means that you own a key that permits you to move a record or unit of measure from one trader to another without third party. This is also called peer to peer network.
Every time you use a cryptocurrency to complete a transaction, you approve transfer of the stated amount from your wallet to that of the seller. The currency is encrypted with your private key and then transferred to the blockchain where the network access your public key. The public key is then utilised to confirm that your private key was used and once the transaction is approved both your wallet balance and the seller are then amended.
How to buy cryptocurrency
For those who want to invest in cryptocurrency they may wonder how do you get cryptocurrency? There are three steps you need to have knowledge of and follow to buy cryptocurrency which are: ◆ Choose a platform
There are two main alternatives you can use which is a traditional broker or cryptocurrency exchanges. Traditional brokers you use an online broker to help you facilitate buying and selling of cryptocurrency. Cryptocurrency exchanges you use exchanges to facilitate buying or selling by yourself.
◆ Fund your account
Most crypto exchanges permit traders to use government issued currency to acquire currency i.e., US dollars mainly using your debit car because some credit card companies don’t allow cryptocurrency transactions. ◆ Place an order
Once you choose the platform and have funds to purchase the last step is to place an order. You can place an order in two ways depending on the platform you choose to use. Either you place via your broker or you place on the crypto exchange site. You select the order type as there are many currencies and the amount you want to purchase and you done.
How to store cryptocurrency
Storing cryptocurrency is the most crucial part because if not stored in a safe and secure way it can be vulnerable to theft and hackers. The common way to store cryptocurrency is using the crypto wallet which stores your private keys securely. Alternatively, some crypto exchanges provide wallet services which securely stores the cryptocurrency on the platform.
In closing since cryptocurrency is an alternative form of payment It can be used to purchase goods and services. But also it is a new technology to some regions it may not be accepted as a form of payment. ◆ Anele Zifiso Dube is a Charted Professional Accountant student at CPA BC in Canada. +17785124588 or sir_ dube@icloud.com