The Characteristics of Cryptocurrencies
Cryptocurrencies are getting better known every day with more people investing in the different currencies and using them for transactions because of the various advantages that they represent such as have no bank regulations etc, but few people actually understand the characteristics of how they are formed because they are not printed notes.
CREATION OF CRYPTOCURRENCIES
The way they are mined is through complicated algorithms and when these have been solved then a crypto currency is created. The good aspect of using this system is that each cryptocurrency is determined through a certain result and cannot be duplicated or forged. These cryptocurrencies are stored on our computers and they cannot be sent twice, forged and the transactions cannot be changed or cancelled.
There are a number of algorithms that are used by the different currencies and as an example, the SHA256 algorithm is used by currencies such as Bitcoin, Mastercoin, Nubits just to name a few. There are also up to 16 different algorithms and the next popular one being Scrypt which is used for lite-coin, top coin and more. These are used for mining purposes but cryptocurrencies can also be obtained through online exchanges.
CRYPTOCURRENCY OBJECTIVES
In order to do transactions that are safe because it is a peer to peer system transactions need to be secure and the objectives of crypto currencies are as follows:
- Each transaction is confidential and the information is kept secret from the third party.
- The integrity is protected by the ability of cryptography to recognize if any changes have been made
- The transactions need to be authentic because it is being done through two people that do not know
each other therefore the person needs to know that the message was sent to them, the proof of their identity and that the transaction is not disowned.
In order to achieve these keys are used to identify the different users. These do not have to be done manually because the crypto currency wallet does this automatically. For example person A sends currency to person B. This currency is sent in the form of an encoded message and that person through their private key can decode the message which is also done automatically. After the person has decoded the message they will know how much person A has sent. These messages can under no circumstances be decoded by the people doing the transaction and it is all done through the wallet.
By sending the message a person also needs to check if it is authentic and it can sign electronically. The electronic signature can be the private key and is the proof that the message has been sent by that person. It is due to this signature that one can shop online and it is the shop’s way of distinguishing that buyer from all the others.
This is basically how transactions are done between recipients and even though it is not necessary to do all the coding is worth while knowing the fundamentals of how the system ensures that the transactions are safe and are not forged.
( I was not writing this. I got this from somewhere else. But this has been very helpful to me. I think this will be helpful to newcomers )
