Cryptocurrency & Blockchain: The what’s and how’s!

Every now and then we hear and read about “cryptocurrency". While it is known that it is a digital currency, there are still a lot of questions that needs to be answered in order to paint a clear picture of what cryptocurrency really is.



Bitcoin, one of the leading cryptocurrencies has captured the minds of many young investors and millennials. Keeping the rapid ups and downs in their prices and their functionality in mind, here are some things to know about cryptocurrency and watch out for.

1.       What exactly is a cryptocurrency?

Essentially, a virtual currency, which can be used to buy goods and trade, cryptocurrency works using a technology called ‘blockchain’.



A decentralized (not issued or backed by any government authority or system) technology spread along a network of computers. Cryptocurrency, unlike paper money has no physical form, they are just information stored digitally, across a network of computers. This is the part of their appeal, the promise of security of the data.

In short, cryptocurrency is just really a set of data, secured using cryptography and hence the name- cryptocurrency.

2.       How do cryptocurrencies work?

Blockchain, a sophisticated record-maintaining system, which is run by several users and is decentralized, i.e., not backed up by any government authority.

For example, when bitcoin is exchanged, a block of data is created and shared across the network of computers. Both the buyer’s and seller’s information or data is recorded as a hash, or a string of numbers and alphabets which is generated by a complex mathematical function.



Now every hash is directly connected to the hash before it (the network), so in case any unauthorized change happens, the record will be altered immediately and will be noticed if any hash is altered. This makes the cryptocurrency super secure and safe unlike the regular currency where the data can be hacked and stolen.

Cryptocurrencies work in a very secured and closed system, thus there is a cap on how many units can be created. Limited cryptocurrencies is what appeals the traders and millennials!

3.       Why use cryptocurrency?

We already have our regular currencies, then why use cryptocurrency?

While the currency we use is under rules and regulations, cryptocurrency has a more democratic approach and thus can be used anywhere and everywhere in the world. They can be bought by anyone in any corner of the world. The network that manages and controls the entire exchange, is responsible for the verification of any exchange made in that network. The verification is done by the network and the people present in it.

Against regular currencies, the promise of security and also the freedom of using the cryptocurrency without any governmental interference, gives it a heavy advantage on why they should be used.

 

4.       What are some popular cryptocurrencies?

When we hear cryptocurrency, bitcoin is what strikes our minds. Bitcoin is one of the most known and used cryptocurrencies, with a $735.3 Billion market capitalization followed by Ethereum with a market capitalization of $324 billion.



There are more than 500 cryptocurrencies that currently exist.

5.       What is the future of cryptocurrencies?

Keeping everything about the working and the volatile nature of cryptocurrencies in mind, it should be noticed that this currency is set to be an emerging asset in the coming years despite the volatile and their decentralized nature.

The popularity of the cryptocurrencies is expected to grow exponentially because of it’s safe and decentralized nature.

As for the technical issues, it is said to be that it can be overcome through technological advances. It is said the profits earned by the miners and the traders would be reduced to an extent where it is negligible because of the creation of new blocks.

However, since a lot of tech-savvy individuals and young traders are in the favor of a decentralized and a different form of encrypted currency, the future of cryptocurrencies look bright as a whole.

Article by- Garima Gaur

Article Sources

https://www.flatworldsolutions.com/

https://www.investopedia.com/

Coin Desk. "Bitcoin Price Index." Accessed April 1, 2020.

                                                                                                                                       

 

 

 

 

 

 

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