How Secure Are Cryptocurrency Transactions?

A wave of cryptocurrency investing has swept the world over the past two years. Only 7.95% of Americans owned cryptocurrency in 2018, jumping to 23.16% in 2021. That’s around 59 million Americans!

If you’re thinking about jumping on the crypto bandwagon, there are a few questions you’re probably asking yourself.

How do transactions work? How secure will your cryptocurrency transactions be? What is blockchain and how is it related to crypto?

To discover the answers to these questions and more, keep on reading!

What is Blockchain?

To better understand cryptocurrency transactions and how secure they are, we need to explore blockchain. Most cryptos use blockchain technology, although some use distributed ledger technologies (DLT) or other similar processes.

Put simply, blockchain is a digital system that uses a chain of blocks to keep and edit information securely. Each block contains a digital fingerprint (a code) that is also stored by the blocks connected to it. When one block is altered, it impacts the surrounding blocks as well.

This method makes it incredibly difficult to change the data without detection. For crypto, the blockchain is used as a ledger, where a transaction or group of transactions a stored on a block. Transactions are duplicated and distributed across all networks that are a part of the blockchain.

Putting the Crypto in Cryptocurrency

Cryptocurrency transactions rely heavily on cryptography – the study of secure communications using coded language. We describe this currency as decentralized due to it being controlled via users and computer algorithms, and not by a government.

When you own a cryptocurrency, it isn’t like owning dollars or pounds. You don’t have a physical representation of your wealth. Instead, you have the private keys necessary to edit the blockchain ledger.

These transactions don’t send money back and forth. Instead, you’re transferring the private key associated with a certain amount of the ledger. That way, you can no longer access that aspect of the blockchain, but the new owner can.

This is a general overview that covers most types of crypto, but some exceptions use completely different mechanics. There are also banks that allow cryptocurrency transactions, but these involve the same process.

Transaction Fees

Transferring any cryptocurrency involves a fee. Some charge quite a lot (such as Bitcoin), while others are much cheaper (such as Ethereum and XRP).

This fee exists because somebody needs to amend the ledger to show who owns the cryptocurrency. These people are responsible for cryptocurrency transaction monitoring and are commonly referred to as “miners”.

Miners earn crypto by allowing their computer systems to be used to run the complex math problems needed to update the ledger. An example is Ethereum mining which has started to become popular recently.

Free Transaction Cryptocurrency

Is there such a thing as a free transaction? The short answer is no…but some are so cheap that you won’t even notice the fee. And some cryptos do allow you to trade for free, but the reality is that most miners won’t accept your transaction and it will simply be canceled after an extended period.

If you’re searching for the lowest transaction fee cryptocurrency, you may wish to check out Dogecoin, Litecoin, XRP, and Ethereum Classic. The latter of these options is as cheap as $0.00023. But you can find a cryptocurrency transaction fee list on most trading websites.

More on Cryptocurrency Transactions

Did you enjoy this article exploring the basics of cryptocurrency transactions and their security? Hopefully, you feel a bit more confident with how they work.

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