Hey, have you bought the coins today? The value was reasonable and seems to rise in the future. These might be the messages you receive or the talks you have with your fellow mates these days when a topic about crypto and blockchain comes up.
But what exactly is this Cryptocurrency and Blockchain. Why is there so much hype about Cryptocurrency these days? By the end of this article, you will get an understanding about Cryptocurrency, how it works and why the public invests in the coins a lot these days.
Crypto or the Cryptocurrency is a digital asset which does not exist physically like paper money nor is it issued by any central authority. Basically, this currency has coins and the coins have ownership records stored in them as ledger in a computerized database which uses cryptography to secure the transactions.
Cryptography is a technique where a particular data is stored and transmitted in a certain way so that only the person to whom it is intended can read and process it. It acts as a medium for secure communication. In 2009, the first decentralized cryptocurrency Bitcoin was created by a developer named Satoshi Nakamoto. Later in 2011 Name coin, Litecoin and Peercoin were created and then paved the way to create many more coins.
Blockchain is basically a system for recording information in a format which is very difficult to change or to be hacked. It is a digital form of ledger for transactions that happen and are distributed and duplicated across the entire network of the computer systems on the blockchain. It is a growing list of records which are secured using cryptography. Basically, each block in the chain contains the record of the number of transactions and every time a new transaction happens, it is added to the participants’ ledger.
Since it is controlled and managed by several participants, it is known as the Distributed Ledger Technology. Block chain is one kind of this technology where the transactions are recorded with an unchangeable cryptographic signature called the Hash. Blockchain basically allows Bitcoin and other cryptocurrencies to operate without any need for a central authority which reduces risks and eliminates various processing costs and fees. Blockchain enables the existence of Cryptocurrency.
Many countries do not have a regulatory framework which governs the Cryptocurrencies including India. But Cryptocurrencies are not illegal in India. In 2021, El Salvador officially known as the Republic of EI Salvador, a country in Central America, became the first country to accept Bitcoin as a legal tender in June.
Some important things to know about Cryptocurrency:
- Cryptocurrency has the possibility of giving high returns but because of its high volatility or the fluctuation there are possibilities for huge losses.
- It can pave a wave to black market activities.
- International transactions can have immediate settlements of accounts.
- Protects from payment fraud because of the technology involved.
- Prevents inflation since the coins are released in a fixed number so when the demand rises the value will increase automatically.
- It can be bought using many currencies, hence facilitating easy currency exchanges.
- Since all the information about the currency is stored as data, any loss of data can lead to financial losses.
- The coins cannot be retrieved if they have been accidentally sent to anyone else. So, the sender would not receive refund or cancellation if he sends to the wrong wallet address.There can be cybersecurity issues involved.
These are some basic details of what Cryptocurrency is and its advantages and the disadvantages. Also, you might have understood how Blockchain technology acts as a substructure to the Cryptocurrency.