How do cryptocurrencies work?
Okay, how do cryptocurrencies or digital currencies work? They work, as I mentioned before, based on the blockchain or block chain. This is a technology that uses an open source system. It is used over the Internet. It’s like transferring emails from one person to another. Satoshi Nakamoto came to give us this technology in order to transfer value.
A very clear example of how I can send you money from here in Brasil, even if you are on the other side of the world, if you are in China, if you are in Japan, all you need is to be connected to this network and have the address that other person to be able to send the amount you want to send. How did I comment on this? It’s an open source system, it’s a decentralized system.
What does this means? That there is no one to regulate it. There is no one to run it. Unlike, for example, the Software Exchange Commission in the United States. This is a great example of a central system. They regulate how much money can be issued within the country, as well as regulating interest rates and some other issues of the economic system.
In the case of the blockchain, it is not an open source system. The people who run this system are those who are connected to the same network, these miners, these groups as the group of computers and people who are connected to that network and who conduct this transaction without anyone having absolute power in the system. Everything is more open, it’s more public. One of the attractive things about the blockchain is that there is no double spend and no double spend. I mean, for example, when a person is in the United States and wants to ship their shipments to Mexico, they have to use a company like your Line or Western Union. Get paid to send money from place to place.
If you want to send a hundred dollars, you will probably be charged a dollar or two dollars in commission, with the blockchain it’s not like that. There are commissions, but commissions are very, very small and are used to keep the network running. Ok now let’s talk about how the blockchain works, the blockchain works like this when one person wants to send value to another and let’s put in this case that person “A” wants to send money to person “B” by creating a transaction.
This transaction is created in your eWallet. Person “A” enters the address of person “B” creates the transaction and this transaction is compressed into a block. And I mean it’s bundled because there are a lot more transactions bundled together with this block. Probably a friend or cousin, or so many other people in the world are creating transactions right now.
These transactions are grouped with the person’s transaction, they create a lock. This block is then loaded into the blockchain, it’s loaded onto the network so that everyone involved, all those computers that are inside the blockchain, realize that it’s just been created. That’s where we get into the miners’ part, when miners, that is, those computers that support or operate the blockchain, start checking this block and it has to be cryptographically verified to validate that each transaction can and can be uploaded to the blockchain. Well, when these miners, when all these computers validate the transaction and it can be in a matter of minutes, depending on the traffic that exists in the blockchain, it has already been validated, it has already gone through the encryption process and this is secure.
How blockchain works
To understand how cryptocurrencies work, it’s important to understand how the Blockchain works. This block is accommodated in the blockchain, they upload it to the blockchain so that person “A” transaction is reflected in person “B” wallet. By that I mean that the value he wanted to send to person “B” is reflected personally and in that way this transaction he has on the blockchain is reflected publicly.
