Cryptocurrencies are constantly growing in popularity especially over the past few years, and yet with all of this hype there is still confusion as to what exactly currencies such as Bitcoin and Ethereum are and why it has everyone so excited. How does Bitcoin work? Who even made this online currency? Will online currencies such as Bitcoin really become the new primary currency of the world? While not all of these questions can be answered right now, we can answer the burning question of how currencies like Bitcoin operate and what’s so great about them.
To understand cryptocurrencies we need to dive into what blockchain is, as this is actually the backbone of the entire system. Blockchain has the capability to greatly reduce fraud and thus is very appealing to organizations that handle sensitive information. How does it work though? Take a scenario in which two computers want to make a transaction with one another. In order for this transaction to be processed a third party computer, also referred to as a mining computer, must certify the transaction which makes cheating in the system very difficult to accomplish. In order for the exchange to be certified and processed, several mining computers come into play and start to solve a difficult cryptographic puzzle, or for a computer this can be basically understood as a complex math problem. Why does it have to solve an equation like this though to certify your transaction? By solving the puzzle this allows for the transaction to go through and to be added to a public record for everyone to view and see that a transaction has occurred and also permits the exchange to be very transparent for all parties involved. This public list is very unique in that it is technically owned by no one person and anyone can add information to it but never replace or delete data that is already there. Because of this, fraud is very difficult to achieve and also provides a very direct path for your currency to travel allowing you to cut out any middlemen like banks to handle the money for you.
Blockchain is a very powerful and new form of processing data that, even if Bitcoin and other cryptocurrencies don’t become the next big currency, several organizations are looking into and developing their own form of to increase security and improve transactions and forms of verification. This piece of technology could greatly reduce the risk of fraud in the long run but for now it is still being developed and is primarily just used for currency exchanges online with cryptocurrencies like Bitcoin. This hacker deterrent method of handling currency while providing more direct and transparent exchanges is how Bitcoin and other cryptocurrencies have gained so much popularity and generally function.
For more information or to have any further questions answered about blockchain or Crypotocurrencies give RCS a call or watch a quick video on the process here to have the process explained in another way.
By Resource Computer Solutions