What is Cryptocurrency?
The Importance and future of Cryptocurrency.
“Bitcoin is a very
exciting development; it might lead to a world currency. I think over the next
decade it will grow to become one of the most important ways to pay for things
and transfer assets. “ Kim Dotcom, CEO of megaupload.
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what is Cryptocurrency?
The world has progressed immensely over the centuries and that’s not a
doubt. From the huge room size computers to the desktop and to the portable
laptops and phones, there has been development and growth in all field of
science and technology. In my opinion one of the fastest growing tech of the 21st
Century is the field of cryptocurrency hence the need for more blockchain
developers. So, then what is Cryptocurrency? A cryptocurrency is a digital or
virtual currency that is secured by cryptography, which makes it nearly
impossible to counterfeit or double-spend. Many cryptocurrencies are
decentralized networks based on blockchain technology—a distributed ledger
enforced by a disparate network of computers. A defining feature of
cryptocurrencies is that they are generally not issued by any central
authority, rendering them theoretically immune to government interference or
manipulation.
Why
is it considered Paperless Money?
Cryptocurrency is regarded as the most convenient
period of trade ever; the best way to understand about cryptocurrencies is that
they are entirely virtual; there is no silver, gold, or paper involved; it is
simply the transfer of digital assets. The essential premise is the same;
imagine them as maintaining spreadsheets of who's paid what to whom, but
instead of many banks keeping their own separate records, crypto uses one
massive spreadsheet to track multiple currencies, which is referred to as a
LEDGER. We all enjoy a good spreadsheet, so why is everyone so obsessed with
cryptocurrency when there are so many benefits? 1. It is decentralized, which
means that all of a cryptocurrency's transactions are recorded on the same
ledger, which is duplicated many times and owned by everyone n the network. You
may have heard about cryptocurrency mining.
What are its advantages?
1. Protection
from inflation:
Inflation has caused many currencies to urge their value to
decline with time. At the time of its launch, almost every cryptocurrency is
released with a tough and fast amount. The ASCII computer file specifies the
quantity of any coin; there are only 21 million Bitcoins released within the
planet. So, because the demand increases, its value will increase which might
maintain with the market and, within the long run, prevent inflation.
2. Self-governed
and managed:
Governance and maintenance of any currency is also a serious
factor for its development. The cryptocurrency transactions are stored by
developers/miners on their hardware, which they get the transaction fee as a
gift for doing so. Since the miners have become acquired it, they keep
transaction records accurate and up-to-date, keeping the integrity of the
cryptocurrency and also the records decentralized.
3. Decentralized:
A major pro of cryptocurrencies is that they are mainly
decentralized. Many cryptocurrencies are controlled by the developers using it
and those who have a significant amount of the coin or by a corporation to
develop it before it’s released into the market. The decentralization helps
keep the currency monopoly free and in restraint, so nobody organization can
determine the flow and so the worth of the coin, which, in turn, will keep it
stable and secure, unlike fiat currencies which are controlled by the
Government.
4. Cost-effective mode of transaction:
One of the most uses of cryptocurrencies is to send money across
borders. With the help of cryptocurrency, the transaction fees paid by a user
are reduced to a negligible or zero amount. It does so by eliminating the need
for third parties, like VISA or PayPal, to verify a transaction. It removes the
requirement to pay any extra transaction fees.
5. Secure
and private:
Privacy and security have always been concerns for cryptocurrencies.
The blockchain ledger relies on different mathematical puzzles, which are hard
to decode. It makes cryptocurrency safer than ordinary electronic transactions.
Cryptocurrencies are for better security and privacy, and they use pseudonyms
that are unconnected to any user account or stored data that might be linked to
a profile.
6. Easy
transfer of funds:
Cryptocurrencies have always kept themselves as an optimal
solution for transactions. Transactions, whether international or domestic in cryptocurrencies,
are lightning-fast. It will be because the verification requires little time to
process as there are only some barriers to cross.
What are its disadvantages?
1. Can be used for illegal transactions –
Since the privacy and security of cryptocurrency
transactions are high, it’s hard for the government to track down any user by
their wallet address or keep tabs on their data. Bitcoin has been used as a
mode of exchanging money in a lot of illegal deals in the past, such as buying
drugs on the dark web.
2. Data losses can cause financial losses –
The developers wanted to create virtually
untraceable source code, strong hacking defences, and impenetrable authentication
protocols.
This would make it safer to put money in
cryptocurrencies than physical cash or bank vaults.
3. Decentralized but still operated by some
organization
The cryptocurrencies are known for its feature of
being decentralized. Even hugely traded coins are susceptible to these
manipulations like Bitcoin, whose value doubled several times in 2017.
4. Susceptible to hacks –
Although cryptocurrencies are very secure,
exchanges are not that secure. This data can
be stolen by hackers, giving them access to a lot of accounts.
After getting access, these hackers can easily
transfer funds from those accounts. Some exchanges, like Bitfinex or Mt Gox,
have been hacked in the past years and Bitcoin has been stolen in thousands and
millions of US dollars.
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