What is a Cryptocurrency?
Cryptocurrencies aspire to be a new form of currency which is digital and allow a peer to peer exchange through the use of technology.
To prevent counterfeiting and fraudulent transactions it relies on cryptography. Compared with other private digital money such as bank deposits, the distinguishing feature of cryptocurrencies is the digital peer-to-peer exchange.
“There are 3 eras of currency: Commodity based, politically based, and now, math based.”
—Chris Dixon, Co-founder of Hunch now owned by eBay,
How does Cryptocurrency system work?
In contrast to the traditional banking system, cryptocurrencies peer-to-peer exchange system doesn’t have a central party to execute the exchange. Cryptocurrencies don’t have a centralized agent to keep a record of all the transactions instead it solves the problem using decentralized distributed ledger technology (DLT). In DLT the technology is decentralized, but its institution or organization may be centralized. Hence a decentralized form of the distributed ledger which is censorship resistant came into discussion & led the technology to emerge as Blockchain.
Blockchain believers don’t trust centralized institutions such as Banks, financial institutions & governments. The blockchain is one of the ways to implement DLT, but not all distributed ledgers necessarily employ blockchains.
The Blockchain is a database of information which is not stored at a single place but across a variety of data servers that participate in the network knowns as “nodes”. Each node has a copy of this information ( digital ledger) and checks the validity of transactions. All these pieces of information are stored in the form of “blocks” and combined it is called as Blockchain. Identities in blockchain are kept completely private through the cryptography. however, all the transactions that happen on the blockchain are open to viewing for anyone at any time.
The first recorded mention of blockchain technology came in the form of a whitepaper published in 2008 by Satoshi Nakamoto & proposed a system for electronic transactions without relying on trust i.e Bitcoin.
Bitcoin, the blockchain revolution!
Bitcoin and other cryptocurrencies have attracted intense interest on the part of businesses and consumers, They are available to provide an alternative of fiat currencies such as USD, EUR etc. From an easy medium of exchange to the store of value, Bitcoin and other cryptocurrencies are now discussed in the mainstream financial medium. A very high transaction speed and very less transaction cost are the key features which are attracting a lot of end users.
“Instant transactions, no waiting for checks to clear, no chargebacks (merchants will like this), no account freezes (look out Paypal), no international wire transfer fee, no fees of any kind, no minimum balance, no maximum balance, worldwide access, always open, no waiting for business hours to make transactions, no waiting for an account to be approved before transacting, open an account in a few seconds, as easy as email, no bank account needed, extremely poor people can use it, extremely wealthy people can use it, no printing press, no hyperinflation, no debt limit votes, no bank bailouts, completely voluntary. This sounds like the best payment system in the world!”
—Trace Mayer J.D., a leading expert on Bitcoin and Gold
Key advantages of using Cryptocurrencies
- They are decentralized because they don’t require validation by a government or a bank to complete the transaction.
- There is no broker or agent in between to complete the transaction between two parties.
- Very fewer transaction fees during the exchange.
- Absolutely fast & smooth transactions as compared to other conventional ways.
- A secure transaction using strong encryption throughout the distributed ledger (blockchain).
What can you do with cryptocurrencies?
You can shop online or offline
Cryptocurrency is now widely accepted by many merchants both online or offline. It can be used to pay for hotels, flights, Jewellery, local shops etc. There are many cafe’s or bars which are accepting different cryptocurrencies as a payment. Within Gaming communities, different cryptocurrencies are very popular which allows players to win cryptocurrencies.
Microsoft has been accepting Bitcoin for use in its online Xbox Store since 2014.
You can use Bitcoin at Overstock,Namecheap,Newegg,Ghostbed,Expedia,Purse.io etc. Adult entertainment site Pornhub accepts Verge currency, Pizzaforcoins and Peddler.com accept Ethereum as well.
You can start Investing in Cryptocurrencies
Cryptocurrencies are the hottest investment area currently available. Since 2011, Bitcoin generated an increase in the value of at least 25,000 percent.
One anonymous person who posted a detailed story on Steemit said that in 2010, the price of each Bitcoin was so low that it was not even valuable enough to buy a pizza. Still, by the end of that year, the person reportedly had 12,000 Bitcoins and collecting the large number of them paid off. His story from an average earner to a millionaire is circulated everywhere on the Internet. Given the gradual rise in the value of Bitcoin over the years, early adopters who got their hands on substantial sums of the cryptocurrency found themselves with an incredible amount of wealth in the last two years.
But Investing in Cryptocurrencies brings an equal amount of risk with it with a very high volatile market and price. One should be careful while investing in cryptocurrencies and do proper research before making a decision. If you decide to invest in cryptocurrencies, Bitcoin is obviously still the dominant one.
“Gold is a great way to preserve wealth, but it is hard to move around. You do need some kind of alternative and Bitcoin fits the bill. I’m not surprised to see that happening.”
– Jim Rickards, American Lawyer, Economist and Investment Banker
You can mine or stake Cryptocurrencies
Miners are one of the most important parts of the Cryptocurrency ecosystem because they mine the blocks to complete the transactions. They contribute their computing power to solve the cryptographic puzzles which are required to confirm the transaction in the network and record it in the blockchain. Many people are interested in setting up mining rigs to mine Bitcoin, Litecoin etc. As of November 2017, almost 17 mln Bitcoins have been mined and distributed.
In order to get started mining, you need dedicated computer hardware with a specialized graphics processing unit (GPU) chip or application-specific integrated circuit (ASIC), sufficient cooling means for the hardware and 24×7 internet connection, a legitimate cryptocurrency mining software package, and membership in both an online cryptocurrency exchange as well as an online mining pool.
Cryptocurrency is getting widely adopted in the digital world due to its advantages over traditional currency system governed by banks or institutions and emerging as a workable an alternative to the more established form of financial trade or medium.
Disclaimer: We are not financial advisors and not providing any financial advice to our readers. Opinions posted in this article are only for educational purpose.