How do cryptocurrencies work?

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4 years ago

How do cryptocurrencies stay accurate?

All cryptocurrencies use some type of consensus mechanism in order to maintain an accurate ledger that describes where all the currencies are. It was the first compatibility mechanism to use (by Bitcoin) a Proof of Work algorithm called SHA-256. Since then, cryptocurrencies have used other algorithms - many of them Proof of Work, some of them Proof of Stake, and some brand new , Like Tangle.

Regardless of the specific consensus mechanism used, all cryptocurrencies rely on some type of algorithm that is distributed among users around the world. By distributing their ledgers to multiple devices and multiple users rather than a single central authority, cryptocurrencies are decentralized.

How do crypto transactions happen?

If Kareem wants to buy something from a share using cryptocurrency, then Karim needs two things to complete the payment. First, Careem needs a cryptocurrency balance that covers the transaction cost and any fees that come with the transaction. Second, Careem needs Kassem's wallet address so he knows where to send the coins for the transaction. When Karim and Kassem reach an agreement, Karim sends the money to Qasem's address. After that, the transaction is sent to the cryptocurrency network for confirmation. Different cryptocurrencies have different methods of confirming transactions, but as we discussed earlier, they all use consensus mechanisms to verify that there is no double spending and that Careem has enough balance to cover a posting.

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