This article strives to answer eight frequently asked questions about cryptocurrency in the most unbiased manner possible. We will follow that up with questions you should ask yourself or a financial professional before investing in digital assets.
Cryptocurrency is any digital store of value that one can exchange for goods and services. Bitcoin is the oldest and most well-known example of a digital currency, invented by a person or persons using the pseudonym “Satoshi Nakamoto” in 2009.
What Is the Purpose of Cryptocurrency?
All cryptocurrency transactions are recorded on a blockchain public ledger. These ledgers are known as decentralized networks. You can think of a blockchain similar to your account history on an online bank account.
Every transaction includes three critical pieces of information: Input, Output, and Amount. The Output is the name of the cryptocurrency account (called a wallet) that is receiving funds, while Amount is self-explanatory.
Are Cryptocurrencies Safe?
Blockchain technology is often described as “hack-proof” because any hacker would need to modify all blocks simultaneously to ensure that the chain was in agreement.
How Does the Mining Process Work?
A complex process called a cryptographic hash function is at the root of mining. Put simply, a hash function is a mathematical trick that takes data of any size, performs an operation on it, and outputs something of a fixed size.