Everybody knows Bitcoin, Litecoin, Steem, etc. - But how do they work?
1. Blockchain
Most of these currencies (like Steem and bitcoin) use a blockchain. It's basicly a list of encrypted data of transactions and all the other things that are made with the cryptocurrency. Such a blocklist is divided into blocks. Every block has a hash, which is built of the hash of the previous block and the data which should be enrypted/hashed. So if you change the data in one block, the hash of this block will be different. Consequently, the hash of all the following blocks will be different.
source: wikipedia.org
2. The network
But why do they use a blockchain? And why is that so safe? Well, there's not only one blockchain. The blockchain is on the computer of every member of the bitcoin network. And if someone changes something in the blockchain, everybody checks for that same change. That makes it nearly impossible to cheat.
3. Mining
The calculation for the hashing and the blockchain is called mining. In bitcoin, every miner gets a small part of the bitcoins, that are "made" by their computers and their mining.
