Cryptocurrency – All you need to know
A cryptocurrency is a digital or virtual currency designed to work as a medium of exchange. It is a form of digital money that is exchanged through the internet. It typically does not exist in physical form (like paper money) and is typically not issued by a central authority. The word “cryptocurrency” is derived from the encryption techniques which are used to secure the network.
There have been many attempts to create digital currency during the 90s. But all the research failed due to Third Party approach. That me the companies behind them verified and facilitated the transactions. Then in 2009 the first decentralized cryptocurrency, bitcoin, was designed by an anonymous programmer or a group of programmers under by the pseudonym Satoshi Nakamoto. Bitcoin was the first blockchain-based cryptocurrency in the world. Bitcoin is a ‘peer-to-peer electronic cash system. It remains the most valuable digital currency until today.
Cryptocurrencies are completely decentralized. It is not regulated by any central banks and government authorities in the world. Most of the cryptocurrencies are worked on blockchain technology. Blockchain is a distributed ledger technology (DLT) that permits data to be stored globally on thousands of servers and letting everyone on the network see every account’s balance. Every transaction is a file that consists of the sender’s and recipient’s public keys (wallet addresses) and the number of coins transferred.
The popularity of cryptocurrencies is increasing worldwide and let’s see what are the advantages and disadvantages of cryptocurrencies.
Advantages
Anonymous and private
All the transaction is anonymous and private. Nobody can track or identify your transactions. The addresses of the currency wallet are only known to people. The payment has been sent and received in that wallet. But the owner of the account can’t be identified.
Payment freedom
You can send cryptocurrencies to anyone from anywhere in the world. There is no other authority involved. No intermediaries in between and no payment limit.
Low fee
The transaction charges are very low and sometimes no transaction fee is in the digital transaction of cryptocurrencies.
Very fast
Cryptocurrency transactions are very fast and no delay in the transactions. You can complete the transaction just like mailing.
Not affected by inflation
Most of the cryptocurrency is released with a fixed amount at the time of its launch. The source code specifies the amount of any coin; like, there are only 21 million Bitcoins released in the world. So, as the demand increases, its value will increase. That will keep up with the market and, in the long run, prevent inflation.
Decentralized
Cryptocurrencies are decentralised. No organisation or authority can check the flow and determine the value of the coin. The value of such currencies is stable and reliable.
Disadvantages
Illegal transactions
Since the government can’t track down the transaction, people use cryptocurrencies as the mode of illegal transactions. Some people cryptocurrency exchange for converting illicitly obtained money.
Data losses lead to financial losses
Cryptocurrencies are protected with high source code and hacking defences. But if any user loses the private key to their wallet, there’s no way to get it back. This causes financial losses.
Every currency are not available in all countries
All cryptocurrencies are not available in all countries. So we have to convert these currencies into one of the major currencies, like Bitcoin and transact again. This makes the transaction fee higher.
Unknown controlling authority
All cryptocurrencies are decentralised. But some unknown organisations are still controlling the flow and amount of some currencies. The can manipulate the value of the coin whenever they want
