Cryptocurrency is decentralized digital money that's based on blockchain technology. You may be familiar with the most popular versions, Bitcoin and Ethereum,but there are more than 5,000 different Cryptocurrency in circulation.

How Does Cryptocurrency Work?

A Cryptocurrency is a medium of exchange that is digital, encrypted and decentralized. Unlike the U.S. Dollar or the Euro, there is no central authority that manages and maintains the value of a cryptocurrency. Instead, these tasks are broadly distributed among a cryptocurrency's users via the internet.

You can use crypto to buy a regular goods and services, although most people invest in cryptocurrencies as they would in other assets, like stocks or precious metals. While cryptocurrency is a novel and exciting asset class, purchasing it can be risky as you must take on a fair amount of research to fully understand how each system works.

Bitcoin

Was the first cryptocurrency, forts outlined in principle by Satoshi Nakamoto in a 2008 paper titled "Bitcoin A peer- to peer Electronic Cash system". Nakamoto describe the project as "an electronic payment system based on cryptographic proof instead of trust.

That cryptographic proof comes in the form of transactions that are verified and recorded on a blockchain.

What is a Blockchain?

A blockchain is an open, distributed ledger that records transactions in cod. In practice, it's a little like a checkbook that's distributed across countless computers around the world. Transactions are recorded in "blocks" that are then linked together on a "chain" of previous cryptocurrency transactions.

"Imagine a book where you write down everything you spend money on each day," says Buchi Okoro, CEO and co founder of. African cryptocurrency exchange Quidax," Each page is similar to block, and the entire book , a group of pages, is a blockchain."

With a blockchain, everyone who uses a cryptocurrency has their own copy of this book to create a unified transaction record. Software logs each new transaction as it happens, and every copy of the blockchain is updated simulateneously with is new information, keeping all records identical and accurate.

Proof of Works vs Proof of Stake

Proof of work and proof af stake are two different validation techniques used to verify transactions before they're added to a blockchain that reward verifiers with more cryptocurrency. Cryptocurrencies typically use either proof of work or proof of Stake to verify transactions.

Proof of Work

"Proof if work is method of verifying transactions on a Blockchain in which an algorithm provides a mathematical problem that computers race to solve, says Simon Oxenham,social media manager at Xcoins.com.

Each participating computer, often referred to as a "miner", solve a mathematical puzzle that helped verify a group of transactions referred to as a block then adds them to the blockchain ledger. The first computer to do so successfully is rewarded with a small amount of cryptocurrency for it's efforts.

Proof of Stake

To reduce the amount of power necessary to check transactions,some cryptocurrencies use a proof of Stake verification method. With proof of Stake,the number of transactions each person can verify is limited by the amount of cryptocurrency they're willing to "stake",or temporarily lock up in a communal safe,for the chance to participate in the process." It's almost like bank collateral," says Okoro. Each person who stakes crypto is eligible to verify transactions, but the odds you'll be chosen to do so increase with the amount you front.

"Because proof of stake remove energy intensive equation solving, it's muschore efficient than proof of work, allowing for faster verification/ confirmation times for transactions," says Anton Altement, CEO of Osom Finance.

If stake owner ( sometimes called a validator) is chosen to validate a new group of transactions, they'll be rewarded with cryptocurrency, potentially in the amount of aggregate transaction fees from the block of transactions. To discourage fraud, if you are chosen and verify invalid transactions, you forfeit a part of what you staked.

The Role of Consensus in Crypto

Both proof of stake and proof of work rely on consensus mechanisms to verify transactions. This means while each uses individual users, to verify transactions, each verified transaction must be checked and approved by the majority of ledger holders.

How Can You Mine Cryptocurrency?

Mining is how new units of cryptocurrency are released into the world, generally in exchange for validating transactions. While it's theoretically possible for the average person to mine cryptocurrency,it's increasingly difficult in proof of work systems,like Bitcoin.

Should You Invest in Cryptocurrency?

Experts hold mixed opinions about investing in cryptocurrency. Because crypto is a highly speculative investment, with the potential for intense price swings, some financial advisor don't recommended people invest at all.

"If you have the U.S. dollar in your cash reserves,you know you can pay your mortgage, you can lay your electricity bill," Palion says. " When you look at the last 12 months, Bitcoin looks basically like my last EKG, and the U.S. dollar index is more or less a flat line. Something that drops by 50% is not suitable for anything but speculation.

That said, for clients who are specifically interested in cryptocurrency, CFP Ian Harvey helps them put some money into it.

Up to here my simple and short story friends,watch out for the next story I will tell you.

April 5