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Cryptocurrency : Everything You Need To Know

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899 Listen to this article Hey readers, the world is moving at a faster rate and so the technology is […]

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Hey readers, the world is moving at a faster rate and so the technology is growing. Well, in other words, this is the era of technology and digitalization. Now, keeping the concept of digitalization in mind, a new element called digital currency has entered the market. Well, Have you heard about cryptocurrency? If yes, then do you know how the system of cryptocurrency works, what is a cryptocurrency, and what are the pros and cons of cryptocurrency? Well, if we talked about cryptocurrency 2-3 years back then it was not so common but now the popularity of this has inevitably grown. And if you haven’t heard of all this, then you are in the right place.

What is Cryptocurrency?

Cryptocurrency is a type of currency available digitally. Unlike the traditional currency-” Money”, this cryptocurrency or say the virtual currency uses the peer-to-peer system for transactions and cryptography as the security system. The simple concept is, the government need not issue any physical form of currency as money, no hard cash transactions are made in this but this currency is all digital, transferred or transacted from digital wallets, is decentralized, and most importantly based on the principle of “Blockchain” technology.

Confused hearing the word “blockchain”? Blockchain is defined as the technology maintained by a network of computers serving the purpose of transactions as a public ledger. It works without compromising security and safety as well as keeping track of the cryptocurrency transactions making the system transparent and trustworthy. In technological language, blockchain technology makes sure that each transaction made adds to the block that is linked to the previous block. A chronological order of blocks is structured breathing a system that is immutable.

Well, now do you understand the basic idea behind this digital currency or maybe the digital wealth (if invested using the principles and understanding rather than just going for it blindfolded.)

When did Cryptocurrency start?

So, cryptocurrency is an interesting technology, but do you know when it was actually introduced? The first cryptocurrency that is bitcoin was introduced in the year 2009 in January. Surprisingly, this cryptocurrency came into existence by some unknown individuals or groups of people who used the pseudonym Satoshi Nakamoto. While we were talking about cryptocurrency.

What is Bitcoin?

So, this brings us to an explanation that cryptocurrency is a generalized term for all digital currencies and Bitcoin is one of them that was the first cryptocurrency introduced and mined on January 3, 2009. Well, after that many cryptocurrencies were mined like Dogecoin, Ethereum, Litecoin, Monero, Tether, etc., and opened new doors for individuals in the technological world where now the transactions could be made without intermediaries like banks or government, and a concept of decentralization was introduced in the payment system namely the peer to peer payment system.

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Where is a Cryptocurrency used?

The concept of cryptocurrency is fascinating, but is it really useful in real life? This question bothers a majority of people who wish to try and use this technology. So, readers, here are some of the uses of the cryptocurrency:

There are more uses of digital currency but a fact to keep in mind is that this digital currency is not regular, and its usage, and pricing varies country to country. Cryptocurrency does come with a lot of opportunities but the risks are also a factor to be kept in mind.

How does Cryptocurrency work?

The system of cryptocurrency seems to be rocket science but if you research and observe it closely, you will learn that cryptocurrency  depends on the following aspects:

  • Blockchain technology
  • Transactions
  • Cryptographic security
  • Verification and Mining
  • Consensus mechanism
  • Decentralization
  • Immutable ledger
  • Wallets

The combination of these aspects forms the mechanism of the crypto world where the Blockchain is the heart of the technology. Then there is the transaction aspect which offers the service of sending as well as receiving the currency along with collecting the essential information like the senders and receivers’ address, amount, etc. to keep transparency and for the security, the system is dependent on cryptographic security. There is no particular authority to control the system, mining is the source for the generation of new blocks in the system and if we talk about the storage, then the digital cryptocurrency can be stored in the digital wallets which makes it easier to use and store for the individual.

Pros of Cryptocurrency

Why is cryptocurrency getting popular and what makes it emerge as a great source of investment to get financial freedom? Below are some of the advantages of cryptocurrency, that have established the cryptocurrency well in the market.

  • No decentralization, More Freedom : This digital currency is controlled by no such central authority as in the case of traditional currency. The system is decentralized which offers an opportunity for the user to have more control over the financial autonomy without much risk of censorship.
  • Safe and secure : If talking about the traditional currency, the scope of thefts and frauds is observed quite often but the cryptocurrencies have a strong security ensured by the cryptographic techniques. The user identities are hidden(protected), transactions are safe, and the chances for immutability are the least.
  • Easy-To-Use  and Fast : You won’t believe but if you do have an internet connection then you can also be a part of this digital currency system making it accessible to all. Moreover, this cryptocurrency also demolishes the hindrance created by less infrastructure like banks, as this is all online(digital).even the cross border transactions have become easy that too with low-cost transaction fees.
  • Investment A big yes : Today, many individuals look at cryptocurrency as a good option for investment and trading where high returns are expected under high risks. But this virtual currency has opened new options for the investment world, something more than those stocks and funds.
  • Innovative with a Transparency : There is no doubt that cryptocurrency and the technologies behind it are for sure big innovations in the digital world. This has promoted more ways to innovate for more things such as cold and hot wallets, dApps, and many other services.
  • Better control and Privacy : Talking about privacy, there are fewer chances of identity fraud as the blockchain system effectively maintains transparency. Moreover, in terms of ownership, the cryptocurrency belongs fully to the owner where the owner is solely responsible for managing, and storing the currency or the private keys.
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Cons of Cryptocurrency

Well, now that we are aware of the advantages the cryptocurrency offers, we should not just focus on one side of the coin. Looking onto the other side of the coin, below are the disadvantages of cryptocurrencies.

  • High risk in Pricing and transactions :  One of the major disadvantages of the cryptocurrency is the price volatility where the value of the cryptocurrency can fluctuate reaching high value at times and may take no time to fall literally in no seconds. Moreover, the risk level remains high in the case of transactions. If once the transaction gets successful, reversement if the cryptocurrency looks for no scope in case of accidental payments.
  • Lack of regulation and monitoring : One one hand, where decentralization gives freedom to the owner on their asset, on the other hand this decentralization is a disadvantage also. The digital currency lacks effective regulation leading to misuses, frauds, scams etc.
  • Consumer protection is questionable : Despite the strong and secure system offered by the cryptographic technology, consumer protection remains at risk if any fraud occurs. There is no such method to get the funds recovered.
  • environmental effects : Well this factor is also accountable as one of the disadvantages. You must be thinking, the traditional currency does use paper harming trees but how can digital currency affect the environment. So readers, this digital currency uses mechanisms such as Proof of work, that runs on energy and computational power impacting the environment in many ways.
  • limited usage : Well, yes the cryptocurrency is gaining a massive popularity but the usage is limited. The currency has not yet flourished as a valid payment globally and is least used in everyday transactions.
  • Difficult to understand : A lack of understanding of the blockchain technology can cause hindrance in the effective usage of cryptocurrency.
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Conclusion

No doubt, cryptocurrency has numerous disadvantages but they have more of the advantages opening more scope for evolution, innovation and hence gain acceptance world wide. Cryptocurrency has a lot of potential to bring a change and transform the world with better and convenient ideas. Well all this raises a question that can cryptocurrency style=”font-weight: 400″> replace money in the upcoming times. For now, cryptocurrency is not seen as a complete replacement for the traditional currency but still holds a good value in terms of assets and financial instruments. We leave this question to you dear readers, and wonder if this will happen, then how and when? Do share your thoughts on this in the comment section below. 

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