Chapter 5
How Cryptocurrencies Work
IN THIS CHAPTER
Understanding the basics of how cryptocurrencies function
Deciphering important terminology you need before investing
Seeing how new cryptocurrencies are born from old ones with forks
In Chapter 4, I explain how blockchain technology works. Cryptocurrencies, and more specifically Bitcoin, have been one of the first use cases for blockchain technology. That’s why most people may have heard about Bitcoin more than they have about the underlying blockchain technology.
In this chapter I get into more detail about how cryptocurrencies use blockchain technology, how they operate, and how they’re generated, as well as some crypto geek terms you can impress your date with.
Explaining Basic Terms in the Cryptocurrency Process
Cryptocurrencies are also known as digital coins, but they’re quite different from the coins in your piggy bank. For one thing, they aren’t attached to a central bank, a country, or a regulatory body.
Here’s an example. Say you want to buy the latest version of Cryptocurrency Investing For Dummies from your local bookstore. Using your normal debit card, this is what happens:
- You give your card details to the cashier ...
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