5.2 Digital Currency Presentation - Copy

Topic 5: The Internet and its Uses

5.2 Digital Currency

• Focus: Understanding digital currencies and the blockchain process used in transactions.

Lesson Objectives

• Comprehend the concept of digital currency and its applications.

• Learn the fundamentals of blockchain technology and its role in tracking digital currency transactions.

Introduction to Currency

• Currency is a fundamental aspect of the economy, used for transactions and trade.

• Questions arise regarding its effectiveness and security, especially in a digital context.

• Digital currency is a modern form of currency, widely used and increasingly accepted.

Understanding Digital Currency

Definition

• Digital currency exists solely in electronic form; it comprises cryptocurrencies like Bitcoin and Ethereum.

• These currencies function in decentralized networks without a central authority controlling them.

Characteristics of Digital Currencies

• They utilize cryptographic techniques to ensure secure and verified transactions.

• Transaction details are transparent and publicly available, yet user identities may remain anonymous.

• Digital currencies frequently rely on blockchain technology for transaction processing and record-keeping.

Introduction to Blockchain

Definition of Blockchain

• Blockchain is defined as a digital ledger that maintains a series of records over time.

• Each record is timestamped and immutable, ensuring data integrity and security.

Key Components of a Block

• Hash Value: Unique identifier generated by a cryptographic algorithm, acting as a digital fingerprint for the block.

• Transaction Data: Specific details regarding transactions carried out within the block.

• Timestamp: The exact date and time when the block is created.

• Block Number: Position of the block in the blockchain sequence.

• Previous Block Hash: The hash value of the preceding block, linking them sequentially.

• Every participant on the network holds a copy of the blockchain, fostering transparency and trust.

Ensuring Blockchain Security

• Each digital currency transaction is recorded on its blockchain, forming a secure environment for financial exchanges.

• Transactions are recorded with the address of both sender and receiver, allowing for clear tracking.

• Cryptography is employed to verify the sender's ownership of the currency.

• All blocks are interlinked, creating a historical trail of every digital currency ever created.

• A distributed network of servers validates transactions, improving reliability and minimizing fraud. If discrepancies occur, the variation among servers flags potential fraudulent activities.

Assessment and Reflection

Exit Ticket: Past Paper Question

1. What is meant by a digital currency?

2. Describe the blockchain process in the context of digital currency.

Sample Answer Key (a) A currency that exists only in electronic form. (b) Any two from: It acts as a ledger by tracking each transaction, it keeps a series of time-stamped records that cannot be altered.

Conclusion

• Digital currencies are transforming the financial landscape through their decentralized, secure nature, facilitated by blockchain technology.

• Understanding these components is crucial for navigating the evolving digital economy.