Cryptocurrency comes from two words Crypto and Currency. You might have heard about Cryptography. Crypto means secret or concealed. The study and creation of the techniques, tools and methods to pass information securely which can not be decrypted by adversaries can be called as Cryptography in broad terms. When these techniques are applied for currency exchange, transactions, purchasing of goods or services through Blockchain technology to create new Digital currency, these new digital currency are widely known as Cryptocurrency or Crypto or Crypto-currency. With the evolution of Fintechs, Cryptocurrency had also evolved. Bitcoin is the 1st Cryptocurrency founded in 2009.
Technology behind Cryptocurrency
No Physical form of Cryptocurrency and Crypto is not issued by any Centralized authority like Banks or Fintechs or any Financial Institutions or Big Corporates
They work on Decentralized control based on Blockchain technology (distributed ledger technology) whereas Central Banks have Central Control where crypto is mined before at the central level with a single issuer. Blockchain makes the control public as it makes the ledger a public financial transaction database. It is managed by a peer-to-peer network that adheres to a set of protocols to validate new blocks which are created going forward. This also makes it robust because once updated it’s very difficult to change the data retrospectively because that would need the alteration of all the blocks and for that to happen practically, permission and collusion of the majority of the network need to happen.
Encryption authenticates every transaction and also makes it a secure transaction.
Also called as Blocks. These blocks or list or records are continuously growing. They provide validation to a Crypto Coin.
Primary components of a Block are a Hash pointer or address to the previous block, the data of the particular transactions and the timestamps.
Since its decentralized, its given that you need to show proof of ownership and how do you do that ?
Crypto does it by creating various kinds of timestamping methods. Proof-of-work was the 1st timestamping scheme that was developed. Most widely used proof-of-work scheme would be SHA-256 & scrypt methods. X11, Blake, SHA-3 and Cryptonight are other hashing algorithms used by Proof-of-work timestamping scheme.
Proof-of-stake is another method of timestamping technique. They secured and validate the network and achieve distributed consensus by requesting the network to own the currency, whatever amount it might be.
Even some cryptos use both the Proof-of-stake and proof-of-work combinedly.
In simple words, every computer which is connected to the Crypto Network is called as a NODE. Based on the kind of role and owner they can either validate, host a copy of the blockchain or relay the transaction.
Anyone can be a Node owner. Either a not for profit company, an individual who wants to make some profit, an organization willing to support or develop the Blockchain tech or a volunteer.
Validation of a transaction is called as Mining in the Crypto network. For doing these validations and contributing to the network, these successful miners obtains Crypto as a reward. They generate hashes which validates any transactions. Lately, the race to mining and increasing acceptability of Crypto resulting in more investment and huge demand of Crypto had put up question on the sustainability of Crypto owing to its huge energy consumption and various other kind of resources like Graphic cards to process the hashing algorithm.
Crypto Mining had resulted in a huge gap in supply of Graphic Cards which had also resulted in artificial rise of price of these graphic cards because miners buy these Graphic Cards as soon as they are available in the market.
How to invest in Cryptocurrency?
Earlier it was a bit tedious process to invest, but now the process is very simplified with various Crypto exchanges, Brokerages & payment services platforms coming up for trading the Cryptocurrency. You can use Robinhood, WazirX, WeBull, Coinbase, Binance, Kraken, Trade Station, SoFi, Gemini etc. to name a few.
Users also need to be well aware of the various methods of storing Crypto. Should be aware of Public Keys and Private Keys. Public Keys are for transaction and you can share that whereas Private keys are secret.
What are the various Cryptocurrency Options available in the market?
Various Cryptocurrency Options starts with the most popular Bitcoin, Ethereum, Dogecoin, Shiba INU, Tether, Polkadot, XRP, Terra. Also, it depends upon which exchange you are part of. Some Cryptos might not be available in your exchange. Bitcoin had become the synonym of Cryptocurrency.
Are Cryptocurrency investment a Good investment?
China had already banned Crypto. India is considering regulations around it. Most countries are not sure about the future, security and risk associated with it. With major influencers, business persons and techies backing Crypto. It’s practically difficult to predict on its future. Driven by no regulations, it’s a very risky option. Governments and Regulatory bodies won’t endorse Crypto as its challenges their core authority and model. At the same time El Salvador had accepted Bitcoin as official currency and thus became the 1st country and Cuba followed them to be the 2nd country in the world to do so. Still as per our research and experience we would suggest you to invest only that much which wont hurt you if the market crashes or if the Government go for a blanket ban. These are the various Risk associated with Cryptocurrency.
Advantages of Cryptocurrency
Truly global in nature, not restricted to a particular geography
- Not driven by any regulations
- Anyone can be the owner and anyone can mine
- Low transaction fees and speedier execution
- Transactions are secure
- No bank account needed
Disadvantages of Cryptocurrency
- Not sustainable, use of lot of resources
- Used in terror funding, drug trade and illegal trafficking
- Most Governments don’t support it
- Addictive and potential of hampering the end users
- Scams and fraud keep happening through Fake websites, virtual ponzi schemes, also they scam through posing as real celebrity and duping the end users, also lot of fraud happen through Chatrooms and public groups where they lure users into dating and persuade them to invest them in non existent Crypto
Cryptocurrency is here to stay. How it will be brought under Government control or how to make it more safe is a point of concern. Yet Crypto is a great technology which is challenging the existing process and projecting itself as a great challenger. Crypto is forcing a change which World leaders are unable to wok out on. At the same time, the user volume is growing exponentially, not even the pandemic is able to slow it down.
What is Cryptocurrency?
Cryptocurrency can be defined as a digital or virtual currency which uses Blockchain technology for security & encryption. It follows a decentralized model.
What are various examples of Cryptocurrency?
Bitcoin, Shiba INU, Tether, Dogecoin, Polka Dot, Binance Coin, Ethereum, Litecoin, Ripple, Cardano, Cosmos, Wink etc.
What are Cryptocurrency exchanges?
Cryptocurrency exchanges are mostly app or websites where you can buy or sell Cryptocoins. E.g. Robinhood, WazirX, CoinDCX, Coinbase, Gemini etc.
Can I do Cryptocurrency Mining?
Yes, anyone can do Cryptocurrency mining.
Is investing in Cryptocurrency safe?
It is a contextual question. It totally depends upon your definition on safe. Cryptos are highly volatile and comes with risk due to various factors. The reason why or why not you should invest in Crypto is explained in detail in this article. Do have a look into it and decide for yourself.