Cryptocurrency is a digital currency that uses cryptography to secure transactions that are recorded on a distributed ledger, ie the blockchain. It is a form of money that exists as encrypted, digital information. It operates independently of any bank and uses sophisticated mathematics to regulate the creation and transfer of funds between entities.
Cryptocurrencies do not require a central authority to govern monetary policy. This authority for cryptocurrencies is typically decentralized, where each transaction is confirmed by receiving consensus from a network of computers interacting with each other.
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The blockchain is a digital ledger of all the transactions ever made in a particular cryptocurrency. It’s comprised of individual blocks (see definition here) that are chained to each other through a cryptographic signature. Each time a block’s capacity is reached, a new block is added to the chain. The blockchain is repeatedly copied and saved onto thousands of computers all around the world, and it must always match each copy. As there is no master copy stored in one location, it’s considered decentralized.
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When a transaction is confirmed it is included in a block. Each block that occurs after serves as an additional confirmation. The default number of confirmations for a Dimecoin transaction to be fully confirmed is set at 6. The more confirmations a transaction has, the more reliable it becomes. Transactions become immutable once they reach full confirmation.
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When a transaction is made, all nodes on the network verify that it is valid on the blockchain, and if so, they have a consensus. Block rewards are used as incentive for active network participants (miners or stakers) who solve complex mathematical problems for creating the next block.
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A masternode is a full node on a server that hosts a copy of the blockchain ledger in its entirety. Additionally, masternodes also provide additional functionality to support the blockchain network.
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There is more to your wallet than just a receiving address. Every address in a wallet also contains a public and private key. Private keys are randomly generated strings (numbers and letters), which allow your coins to be spent. Private keys are mathematically related to each receiving address; every receiving address generates a unique private key. Due to a strong level of encryption resulting from the cryptographic algorithm, it is almost impossible to reverse engineer.
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The fees included with a transaction are collected by network validators (miners or stakers) responsible for confirming transactions on the blockchain. Higher fees increase the priority of your transaction. In turn, it is more likely to be picked up and confirmed faster. Alternatively, lower fees may result in your transaction taking longer to be picked up from the mempool, where all the valid transactions wait to be confirmed. If the fee is too low, the potential exists that miners or stakers will not consider it for validation.
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Most of the time, the transactions you send will confirm without any issues. However, there are rare instances where you might create a transaction, and it fails. If this occurs, the transaction is considered rejected by the network.
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Change addresses are an aspect of cryptocurrency that allows users to use specific amounts, even if the transaction isn't the total amount of the output being spent.
It is similar to transacting with cash. If the buyer pays with a $20 bill, but the transaction costs $5, they would receive $15 in change back. In cryptocurrency, the difference between the total amount paid and the total transaction cost is sent back to the user as "change" through the use of a change address.
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