The dictionary meaning of cryptocurrency is that it a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. Cryptocurrencies are so called because the consensus-keeping process is ensured with strong cryptography. This, along with aforementioned factors, makes third parties and blind trust as a concept completely redundant.
Cryptography was born out of the need for secure communication in the Second World War. It has evolved in the digital era with elements of mathematical theory and computer science to become a way to secure communications, information and money online.
In this technological era, blockchain is everywhere. The blockchain is the technology that enables the existence of cryptocurrency. It is a decentralized ledger of all transactions across a peer to peer network. Using this technology, participants can confirm transactions without a need for a central clearing authority. Potential applications can include fund transfers, settling trades, voting, and many other issues. This technology was invented in 2008 to launch a new cryptocurrency, Bitcoin, which is further becoming a secure media of transactions.
To make it more clear about the blockchain, here is how it works:
In simple words, a block is a record of new transactions about the details of cryptocurrency. Once each block is completed filled then is added to the chain, hence creating a chain of blocks: a blockchain. Because cryptocurrencies are encrypted, processing any transactions means solving complicated math problems. People who solve these mathematical equations are rewarded with cryptocurrency in a process called “mining.”
If you own any cryptocurrency, what you really have is the private key to its address on the blockchain. With this key, you can withdraw currency to spend, but if you lose the key there’s no way to get your money back. Each account also has a public key, which lets other people send cryptocurrency to your account. Information on the blockchain is also publicly available. It’s decentralized, meaning it doesn’t rely on a single computer or server to function. So any transactions are instantly visible to everyone. This makes blockchain as the public ledger.
One of the main benefits of blockchain is that it is like a trust protocol to coordinate possibly in untrusting entities.