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We have all heard impressive stories about people multiplying their money through Cryptocurrency, haven’t we? But whenever we try to approach the subject, it looks very difficult to understand. If you are one among such people, do not worry. You have come to the right place. We will explain Cryptocurrency and its functioning in the simplest manner. Read the entire article to know more.

Currency is subject to manipulations by a government but Cryptocurrency functions purely by mathematics. It is money in a digital form that does not have a central authority and functions through a peer-to-peer network that is known as the blockchain. Any transaction or modification in this chain will have to be approved by every peer. Unless this is done, no transaction can take place.

Cryptocurrency, therefore, maintains a top-secured chain that prevents theft or hacking. However, since it is digital and functions online, it cannot be said to be totally invulnerable to hackers. A financial exchange between people on the blockchain network is verified by the peers to know its reliability. Every person needs to have secret keys and public keys to make a transaction possible. The peers do not know each other so the network is unbiased and anonymous.

What is a Ledger?

There is a Ledger that is central to Cryptocurrency. Ledger makes everyone to maintain transparency in their transactions and carefully tries to avoid the danger of double-spending. The Ledger can be defined as the records that are made in a structured set. It has particular conditions that cannot be changed by a single peer. This runs automatically without anyone’s interference.

What are Cryptocurrency wallets and mining?

Transactions are shared among peers using Cryptocurrency wallets. Wallets are accounts of users into which balances are transferred. All the transactions occur via encryption and are absolutely safe. Every deal gets recorded on the Ledger so that no information is lost. The process through which a transaction gets recorded on the Ledger is called mining. Mining is done by people who run processes that aim at confirming the deals to public Ledger.

How can one trade with Cryptocurrency?

The process of obtaining Cryptocurrency might look difficult but it works in the same way as any other currency. You can get Cryptocurrency in exchange for products and services, you can exchange your cash with Cryptocurrency, or you can even exchange Cryptocurrency with other Cryptocurrencies. Trading in Cryptocurrency is mostly carried out by brokers. However, you can also deal with Cryptocurrencies through direct contact with peers.

You should know that Cryptocurrencies are liable to change rapidly and are also unpredictable. If you are a beginner, then take it easy when you start dealing in Cryptocurrency. Even if you have some experience, you should be wise, while doing any investment.  You should also be prepared to lose money according to changes in the Cryptocurrency market. Like it happens with ordinary cash, you will have to pay taxes when it comes to Cryptocurrency as well. So, if you make profits, you will have to pay some tax and you might even have to pay other taxes like sales tax.