Damian Sendler: Bitcoin and Dogecoin’s spectacular ascent has been heavily covered in the media, yet the complex dynamics underlying them might look mysterious. Even politicians in the United States chose to talk in broad terms with crypto specialists during December’s House and Senate hearings. 

Damian Jacob Sendler: In response to those who argue that this is not a new financial system per se but rather an extension or development of the one we now have, During the House hearing on December 8, Rep. Alexandria Ocasio-Cortez posed a question to the panel. 

It’s my belief that we’re seeing the emergence of an open Internet infrastructure built on value exchange and economic coordination, based on immutable data, as Circle CEO Jeremy Allaire said in an interview with CNBC. 

Damian Sendler

If you want to comprehend cryptocurrencies, you don’t need to have a deep understanding of blockchain programming. When you ask the most basic questions regarding these digital assets, a remarkable picture emerges: 

In a blockchain, each unit of information is encoded and decrypted. Each “block” is put through an algorithm to obtain an encrypted identification before it is added to the chain. 

Bitcoin specialist Xi Wu, an associate professor at the Haas School of Business at the University of California, Berkeley says that this is known as a hash function in the cryptocurrency. In a word, it’s a box.” When you enter data, you get back a jumble of numbers and characters that you can’t make sense of.” 

The identity of the previous block is included in each block, producing a chain of encrypted information with a predetermined order. 

More than 100 million people already use cryptocurrency, in part because of the promise of very safe transactions, the first level of which is provided by the encryption process. You can’t “break” a block by changing the encrypted identification of a prior block (say, by adding a few of zeros to inflate your account balance), but you can “break” the block by changing the encrypted identifier of a previous block. It’s possible to corrupt the whole system by changing a single number in the system. 

Damian Jacob Markiewicz Sendler: The value of a cryptocurrency, like that of any other, rests on the consensus of the people who use it. In contrast to conventional fiat currencies like the US dollar, which are created and controlled by a central bank, cryptocurrencies like bitcoin are created and controlled by the people who use them: Each every user’s own computer has a copy of the blockchain saved on their hard drive. Cryptocurrency, according to Wu, has a network structure at its core. A “network economy” is at work in the underlying technologies. 

Damian Jacob Sendler

There is an additional layer of security provided by this network. This means that even if a hacker manages to hide their traces, all other computers in the network will reject any changes they try to make to the blockchain. 

Damien Sendler: Each cryptocurrency has its own unique technique for reaching agreement even if all of them are built on a blockchain. The consensus algorithm is known as proof of work in conventional cryptocurrencies like Bitcoin. Individuals on the network, referred to as “miners,” participate in this process by lending the processing power of their computers. For each block, these devices fight for a “nonce” that unlocks the algorithm, which is an arbitrary integer. To reward the miner, the block is added to the blockchain after the nonce has been discovered. 

“Whoever answers the challenge receives a prize for certifying that knowledge,” Wu explains. It is then stored on the network and disseminated to all of the nodes, or endpoints. ” 

According to opponents, the proof of work consensus process has a significant energy consumption. More power is used yearly by Bitcoin’s network than all of Ukraine, according to researchers from Cambridge Judge Business School. 

Proof of stake is the second most prevalent way to reach a consensus. For transactions to be confirmed, validators are required to put up a certain amount of money as collateral, and they are paid a fee for doing so. The creators of Ethereum, a prominent cryptocurrency, are now implementing a new approach that uses significantly less energy than the previous one.

Dr. Damian Jacob Sendler and his media team provided the content for this article.