How Crypto currency work? Contd.....

   

    6. Cryptocurrency Exchanges

Many lesser-used cryptocurrencies can only be exchanged through private, peer-to-peer transfers, meaning they’re not very liquid and are hard to value relatives to other currencies-both crypto-and fiat.

More popular cryptocurrencies, such as Bitcoin and Ripple, trade on special secondary exchanges similar to forex exchanges or fiat currencies. These platform allows holders to exchange their cryptocurrency Holdings or major fiat currencies, such as the U.S. Dollar and euro, and other cryptocurrencies and setting their value- usually less than 1%.

Cryptocurrency interchange plays a valuable role in generating liquid markets for popular cryptocurrencies and setting their price relative to traditional currencies. However, exchange pricing can still be extremely volatile- Bitcoin’s U.S. Dollar exchange rate fell by more than 50% in the wake of Mt.Gox”s collapse, for instance.

    7. The Anatomy Of Cryptocurrency

Although there can be exception to the rule, there are a number of factor that make cryptocurrency so different from the financial systems of the past:

    8. Adaptive Scaling

Adaptive scaling essentially means that cryptocurrencies are built with a number of measures to ensure that they will work well in both large and small scales.

A number of other measures are included in digital coins to allow for adaptive scaling including limiting the supply overtime and reducing the reward for mining as more total coins are mined.

    9. Decentralized

Most currencies in circulation are controlled by a centralized government and thus their creation can be regulated by a third party. Cryptocurrency’s creation and transactions are open source, controlled by code, and relay on peer-to-peer networks. There is no single entity that can affect the currency.

    10. Digital

Traditional currency is defined by a physical object, but cryptocurrency is all digital. Digital coin are stored in digital wallets and transferred digitally to other people’s digital wallets. No physical object ever exists.

    11. Proof of Work

Most cryptocurrencies use of proof of work system. A Proof of work scheme uses a hard to compute but easy to verify computational puzzle to limit exploitation of cryptocurrency mining. Essentially, it’s like a really hard to solve “catpcha” that requires lots of computing power.