Just as the name would suggest, cryptocurrencies are a form of digital currency that use cryptography, or encrypted codes, to secure and verify transactions. The encryption allows transactions to process between two parties, rather than requiring a middleman such as a bank or a payment processor. In the world of credit cards and checks, fraudulent activity is rampant and it’s difficult to trust that the information someone else gives you is legitimate. How can additional trust be added to monetary transactions and how can you ensure that funds you receive are valid?
Enter the world of blockchain. Blockchain is a new technology that keeps an immutable ledger/record of all transactions that occur with a cryptocurrency. By using cash, you may have dollars in your wallet but no record of their origin and no proof that they aren’t counterfeit. Their acceptance by a third party, such as a bank, is the main way to verify validity. A blockchain removes these obstacles, by keeping a record of all transactions used by the currency – from its origin to the moment you receive it. This lengthy record of all transactions is held on computer servers owned by several different anonymous parties rather than by a single company or bank. Once a transaction is made and saved on the blockchain, it can never be edited, modified or changed – making it a reliable record without the need for a trusted third party. And just like that, banks and their fees are cut out of the monetary system, allowing you to trust in financial transactions with anyone around the globe.