A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority
Its digital ledger is a computerized database using strong cryptography to secure transaction records, control the creation of additional coins, and verify the transfer of coin ownership.
So, Cryptocurrency is a decentralized medium of exchange having cryptography that is used for verifying and facilitating each transaction. And the mode of exchange runs on the blockchain technology that lends the current decentralized status. It is a shared public ledger that contains all the transactions that have ever taken place within a network.
How does cryptocurrency works?
According to Satoshi founder of Bitcoin, Cryptocurrency is a peer-to-peer cash system and does not require a central authority. A cryptocurrency is a tradable digital asset or digital form of money, built on blockchain technology that only exists online.
Cryptocurrencies use encryption to authenticate and protect transactions, hence their name. There are currently over a thousand different cryptocurrencies in the world.
1. Architecture: Decentralized cryptocurrency is produced by an entire cryptocurrency system collectively, at a rate that is defined when the system is created and which is publicly stated. As of May 2018, over 1,800 cryptocurrency specifications existed.
Miners use their computers to help validate and timestamp transactions, adding them to the ledger by a particular timestamping scheme. In a proof-of-stake (PoS) blockchain, transactions are validated by holders of the associated cryptocurrency, sometimes grouped in stake pools.
2. Blockchain: The validity of each cryptocurrency's coins is provided by a blockchain. A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a hash pointer as a link to a previous block, a timestamp, and transaction data.
3. Nodes: A node is a computer that connects to a cryptocurrency network. The node supports the cryptocurrency's network through either; relaying transactions, validation, or hosting a copy of the blockchain. When a transaction is made the node creating the transaction broadcasts details of the transaction using encryption to other nodes throughout the node network so that the transaction is known.
3. Timestamping: It is proof of work. Cryptocurrencies use various timestamping schemes to "prove" the validity of transactions added to the blockchain ledger without the need for a trusted third party.
4. Mining: In cryptocurrency networks, mining is a validation of transactions. And miner gets an incentive as well as rewards for processing crypto coin transactions.
5. GPU price rise: An increase in cryptocurrency mining increased the demand for graphics cards (GPU) in 2017. Popular favorites of cryptocurrency miners such as Nvidia's GTX 1060 and GTX 1070 graphics cards, as well as AMD's RX 570 and RX 580 GPUs, doubled or tripled in price – or were out of stock
6. Wallet: cryptocurrency wallet stores the public and private "keys" (address) or seeds that can be used to receive or spend the cryptocurrency. With the private key, it is possible to write in the public ledger, effectively spending the associated cryptocurrency. With the public key, others can send currency to the wallet.
7. Anonymity: Bitcoin is pseudonymous rather than anonymous in that the cryptocurrency within a wallet is not tied to people, but rather to one or more specific keys (or "addresses"). Thereby, Bitcoin owners are not identifiable, but all transactions are publicly available in the blockchain.