How to use blockchain for cryptocurrency

To understand how cryptocurrency uses blockchain, we first need to understand blockchain and how it enables cryptocurrency.

Blockchain

Blockchain is essentially a distributed ledger containing records of transactions. These transactions are stored on pages of the ledger, which we refer to as blocksData structure containing multiple transaction. The blocks are connected with cryptography. Each new block contains the previous block's cryptographic hashvalue generated by transforming some information, can be used as a key to identification, which is calculated by the miners Individuals utilizing computer power to calculate hashes(explained later) in return for a reward.

The blockchain is decentralized and distributed. A copy of the public ledger is shared between many computers, and to change something that is already written on the ledger will require all preceding and following blocks to be modified. Everyone with a copy of the ledger will have to acknowledge this change. This makes committing fraud on blockchain virtually impossible.

Cryptocurrency

Cryptocurrency works on top of the blockchain architecture. Newer crypto is rewarded by miningAct of calculating hash for the block, which is when someone solves the hash of the transaction and adds it to the block. The reward is usually some fees from the transactor’s account to the miner who mined the transaction. The computational power required to calculate the hash for the next block is very large, so many people pool together and share resources to mine together. In this case, the reward is distributed among the winner pool (who found the hash fastest) according to the work done by each individual.

The owner of the cryptocurrency only owns a key pair, the private keyLarge numerical value, used to decrypt data allows them to access and move their share of currency. For verification, the transaction is signed by the transactor using their public keyLarge numerical value, used to encrypt data. These keys are required to encrypt and decrypt data using cryptography.

Since it is all digital, the currency is non-tangible. All transactions are public due to the nature of blockchain i.e, public ledger. This introduces transparency and further minimizes fraud. We can look at Bitcoin explorer to get a feel of what information is stored inside a ledger.

There are cryptocurrencies that run on game Token economicsThe underlying mechanics by which a cryptocurrency operates, and some are deflationary. This is the start of what can be done to create better financial tools than what traditional fiat currency offers. Some cryptocurrencies are pegged linking the market value of a cryptocurrency to an external referenceto the more traditional types of securitiesfungible, negotiable financial instrument that represents some type of financial value e.g, stocks, USD, and gold.

This immutability, transparency, security, and decentralization of cryptocurrency make it arguably better than traditional fiat currency. With fiat currency, we can transfer large amounts of money between continents without going through several banks, but the transaction would require a lot of paperwork and time. However, with traditional fiat, it can be done securely in seconds with cryptocurrency.