What are the underlying technology types of digital currencies?

Digital currencies use six main underlying technologies: blockchain, distributed ledger technology (DLT), hashgraph, cryptography, smart contracts, and consensus mechanisms. These technologies influence the characteristics, security and innovation possibilities of digital currencies.

Underlying technology type of digital currency

Digital currencies are based on various underlying technologies, which affect the characteristics and operation of currencies. The following are the main types:

1. Blockchain

• Digital ledger used to record transactions and maintain currency supply security.
• Distributed network ensures that transactions cannot be tampered with and are transparent.
• Many digital currencies such as Ethereum, Bitcoin, and Litecoin use blockchain technology.

2. Distributed Ledger Technology (DLT)

• Similar to the blockchain, it is a shared digital ledger.
• However, DLT can be more flexible, allowing private and controlled access.
• Digital currencies that use DLT include Ripple and Hyperledger Fabric.

3. Hash graph

• A mathematical function used to verify data integrity.
• In digital currencies, hashmaps are used to ensure that transactions cannot be tampered with.
• Currencies like Bitcoin and Ethereum use hashmaps as a key part of their underlying technology.

4. Cryptography

• Technology used to protect the security and privacy of digital currencies.
• Cryptographic technologies such as elliptic curve cryptography (ECC) and hash functions are used to encrypt transactions and protect keys.

5. Smart Contract

• Automated procedures executed on the blockchain.
• Smart contracts can automatically execute transactions and implement more complex digital currency applications.
• Ethereum and other smart contract-based currencies allow the creation of decentralized applications (dApps).

6. Consensus mechanism

• Protocol to verify transactions and maintain the integrity of digital currency networks.
• Common consensus mechanisms include Proof of Work (PoW), Proof of Stake (PoS), and Delegated Proof of Stake (DPoS).

Together, these underlying technologies form the foundation of digital currency, providing security, transparency and innovation potential.

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