What is Cryptocurrency?
Cryptocurrency is a type of digital currency in which all transaction information is encrypted in a Decentralised Database. However, till now such currency is not recognized by the central bank of a country, due to which there is a fear about its validity or future.
Currently, more than 1500 cryptocurrencies are prevalent worldwide. Bitcoin, Ethereum, etc. are some examples of cryptocurrency in addition to the libra announced by social media company Facebook in the recent past.
The main objective of the invention of cryptocurrency was to eliminate the role of banks or other middlemen in financial transactions.
In the normal banking process, transaction details are verified by banks while exchanges done in cryptocurrency are verified through blockchain technology by decentralized databases spread across multiple countries.
What is cryptocurrency? (in Detail)
Imagine a digital token that can be transmitted instantly to any spot on the globe 24/7. Besides, it is impossible to tear or lose the coin accidentally as it frequently happens to conventional money. A virtual currency is issued and transactions are processed entirely via the Internet.
This is all about a cryptocurrency that is digital or virtual money. The principal difference from conventional (or fiat) money is that cryptocurrencies represent decentralized networks, so they exist outside the control of governments and central banks. This feature appeals to those who want their savings to be immune to interference by authorities.
Another feature appreciated by crypto fans is anonymity. A cryptocurrency holder is able to make a large number of transactions without disclosing his/her name, address, or any personal information.
The term “cryptocurrency” was introduced in 2011. Nowadays, this word refers to all digital tokens other than paper banknotes or metal coins. The cryptocurrency concept belongs exclusively to the digital world.
How to Store BTC
Generally speaking, users do not store bitcoins, they keep digital keys that allow them to sign transactions. As in the case of traditional money, digital keys are usually kept in digital wallets.
There are several types of digital wallets. They include desktop, mobile, online, and hardware wallets:
Software wallet
is the easiest and safest way to store cryptocurrencies. Owners of crypto assets install a desktop wallet on a personal computer and control the storage of digital money themselves. This method is best suitable for advanced miners who possess relatively large amounts of bitcoins.
Mobile wallet
It is a specific application designed for smartphones. Software wallets are less easy to use as people do not have access to the wallet outside the house when they need to purchase something. As for mobile wallets, you will be able to make a bitcoin payment directly from your smartphone.
Online wallet
Is the easiest way to store bitcoins. Everything you need is to find a provider that offers such services. The main advantage of online wallets is that they do not require special software. Among the disadvantages are service failures that hack or increase risks of password attack which may lead to digital currency theft.
Hardware wallet
Is a device designed to store digital keys in electronic format? The major benefit of a hardware wallet is that it does not require Internet access.
Paper wallet
A paper wallet allows users to store cryptocurrencies, or rather, digital keys, offline. Everything you need is to print a key on paper and place it somewhere safe. This is a secure way to keep bitcoins, as only the owner has full control over the wallet.
Some Example of Cryptocurrencies
- Bitcoin (BTC)
- Ethereum (ETH)
- XRP (XRP)
- Tether (USDT)
- Bitcoin Cash (BCH)
- Litecoin (LTC)
- EOS (EOS)
- Binance Coin (BNB)
- Tezos (XTZ)
What is blockchain technology?
A blockchain is a type of decentralized distributed ledger, in which information related to the exchange is encrypted as a block.
Each data (block) entered in the blockchain has its own unique electronic signature, which cannot be changed. In addition, the electronic signature of the previous block is also recorded in each block, so that they can be easily placed in a series.
Once any transaction is recorded in the blockchain, it can neither be removed nor modified from there.
The entire information of blockchain exchange is preserved in thousands (or millions) of computers, rather than being stored in one place.
Any new transaction is verified by all computers connected to the database (in blockchain technology these are known as nodes).
Benefits of cryptocurrency
1.Transactions in cryptocurrency do not require the role of a bank or any other middleman, so transactions can be done through this channel at a very low cost.
2. Trading in cryptocurrency does not require any type of form (identity card etc.), so anyone can join the financial sector through this system.
3. The biggest advantage of cryptocurrency is its secrecy, in the absence of the requirement of a form, people's private information is protected during the transaction.
4. Cryptocurrency can be used in any country in the world at no extra charge. However, cryptocurrency has not been legalized by any country as a currency.
Disadvantage of cryptocurrency
1. Cryptocurrency does not get the recognition of any country or central bank due to which there is a fear of volatility of its value. For example, in December 2017, the price of bitcoin was more than US $ 19 thousand, while in December 2018 its price decreased to US $ 3200.
2. Due to the secrecy of cryptocurrency there is a fear of its use in terrorist or other illegal activities.
3. Private cryptocurrency is not affected by the monetary policies of the government, so promoting the use of cryptocurrencies can be detrimental to the country's economy.
More detail about CryptoCurrency
- What is Cryptography?
- What is Cryptomining?
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