Cryptocurrencies work using a decentralized system known as blockchain technology. In a blockchain, transactions are verified and recorded by a network of computers called nodes, rather than a central authority or intermediary like a bank.
When a user initiates a transaction, it is broadcast to the network of nodes for verification. The nodes use complex algorithms to verify the transaction and confirm that it is valid and meets certain criteria. Once a transaction is verified, it is added to a block of transactions and added to the blockchain.
Each block in the chain contains a unique code, known as a hash, that links it to the previous block in the chain. This creates an unalterable chain of blocks, providing a permanent and tamper-proof record of all transactions.
To assure the security of the system, transactions in the blockchain are encrypted using complex cryptographic algorithms. This provides a high level of security and makes it very difficult for hackers to manipulate the system.
Users can store cryptocurrencies in digital wallets, which are secured by private keys that only the owner can access. Cryptocurrencies can be used to make purchases and payments online, and they can also be bought and sold on cryptocurrency exchanges.
The value of cryptocurrencies is determined by the supply and demand in the market, and their prices can be highly volatile due to factors such as news, events, and investor sentiment. It is important to exercise caution when investing in cryptocurrencies and to conduct thorough research before making any investment decisions.