Bitcoin is a term most have heard at least once, especially with its recent spike in value to about $1,200 (though it has since fallen).

With the rise in popularity of cryptocurrencies, it would be worth understanding this new form of digital currency to a more detailed degree. Hopefully the following information will clear up any questions concerning cryptocurrencies.

To first answer the question of what exactly a cryptocurrency is, the broadest definition is “a form of digital currency,” although that does not quite answer the question. To be more precise, cryptocurrencies are bits of data stored on a peer-to-peer server that are inherently unable to be changed or modified due to a system called blockchains. Blockchains, when concerning cryptocurrencies, are comparable to a ledger that a business would use to keep track of all transactions.

All users who work with cryptocurrencies have to adhere to a shared public blockchain through peer-to-peer networking.

Each user possesses a copy of the blockchain, thus allowing for any transactions to easily be verified and cross-checked against thousands of users.

This means that there is no centralized version of the database for a hacker to manipulate.

With that established, how exactly does the blockchain work with cryptocurrencies?

This is accomplished through miners, who are essentially the bookkeepers of the cryptocurrency world.

Utilizing high-powered computing rigs, they verify and confirm transactions around the clock.

After the confirmation of a transaction, a miner spreads it back into the network and each node (or user) must then add it to its database.

At this point, another entry has been made in the global blockchain.

As compensation for this crucial job, the miners receive an amount of currency based on their work.

The process of mining is another topic altogether, but in short, it is a process in which a miner must dedicate an amount of power from their device to solve a cryptological puzzle.

This gives the miner(s) the right to build a block to add to the blockchain. Ownership of a cryptocurrency can also be a bit complex. Each user has their own “private key,” which is essentially your key to access and utilize your currency.

The properties of this type of currency also lend to its value on the market. With the security and reliability of blockchains, the cryptocurrency can be nonreproducible without going through the verified process of mining.

Each transaction is permanent, unalterable and untraceable.

No entity can prevent or inhibit users from spending their currencies.

It is also worth noting that there are many different types of cryptocurrencies besides Bitcoin, some even with minute differences in their uses.

Some that exist currently include Litecoin, Dogecoin, Ethereum and even a garlic bread-based Garlicoin.

With the rise of a new economy, each is vying for dominance in a brand new free market.