AN INTRODUCTION TO CRYPTOCURRENCY

AN INTRODUCTION TO CRYPTOCURRENCY

Introduction

It is form of digital currency that works on the Blockchain technology. It is in fact the first ever application of the Blockchain technology which is used to verify the transfer of assets and control the addition of new units in order to secure financial transactions using cryptography.

Compared to the normal (fiat) currencies, the cryptocurrency has the most important advantage of not being controlled by any central authority, whereby funds cannot be hacked or stolen on the digital platform due to instant recording of the transactions on all distributed ledgers of the participants in the network. Therefore, the transparency and distributed nature of the blockchain technology make cryptocurrencies secure. 

CRYPTOCURRENCY

Types of Cryptocurrency

There are at least 3000 odd cryptocurrencies in the world over which a few have almost stayed at a saturated stage with addition of one cryptocurrency every day. However, with the market driven forces fully in action, majority of these options will eventually fail as users will finally limit their option to a few. Some of the popular cryptocurrencies doing the round now are:

  • Bitcoin
  • Ethereum
  • Litecoin
  • Z Cash
  • Dash
  • Ripple
  • Monero
  • NEM
  • Stellar – the first two capturing major market share at present. 

How Cryptocurrency Works?

Ever since Bitcoin had taken off in the year 2009 by its famous exponent Satoshi Nakatoma, Bitcoins have expanded its network to be the numero uno cryptocurrency in the world and still continue to hold its status quo. The simplicity of the Blockchain concept makes it work seamlessly. A registered sender in the Bitcoin network starts a transaction and sends Bitcoins to a receiver by submitting the transaction on a public Blockchain network of Bitcoin.

They also validate whether the sender has enough Bitcoins to send to the receiver and also ensure that the sanity of the underlying Blockchain network to the Bitcoin is not corrupt. On completion of the transaction, the block is added, and the ledgers across all the nodes are updated, thereby allowing all the participants to have the same copy of the information.

The world is clearly divided now on the usage of cryptocurrency. While on one hand an influential group like Bill Gates, Al Gore and Richard Branson vouch for their efficacy better than the regular currencies, there are others like Warren Buffet, Krugman and Shiller (Noble Prize winners in Economics) who call it a Ponzi scheme and a means for criminal activities. In the future, however, there’s going to be a conflict between regulation and anonymity wherein governments would want to regulate how the cryptocurrency works. 

Advantages And Disadvantages Of Cryptocurrency

Advantages

When it comes to the advantages of cryptocurrency, they are immeasurable. They succeed in making things easier to transfer funds between two parties without any hassle, and without the involvement of a third party such as a bank or credit card company.

The transfers are made more secure with the use of public and private keys including different forms of incentive systems like Proof of Work or Proof of Stake. In modern times where cryptocurrency is made use of, “wallet” has gained fame. A user’s e-wallet or account address has its own public key, while the private key is disclosed only to the owner. The private key is used by the owner to sign transactions. Minimal processing fee is required during fund transfers.

Disadvantages

The discreet nature of cryptocurrency transactions makes them suitable for a host of illegal activities, such as money laundering and tax evasion. This is because it is difficult to trace such discrepancies easily.

However, cryptocurrency advocates prefer being anonymous, citing benefits of privacy like protection for whistle-blowers living under strict governmental laws. Some cryptocurrencies are thankfully more private than others which offer such advantages.

Bitcoin, for instance, is a poor choice for carrying out illegal businesses online. This is due to the forensic analysis of the Bitcoin blockchain has made it easier for authorities to arrest and prosecute criminals. More privacy-oriented coins do exist, however, such as Dash, Monero, or Z Cash which are far more difficult to trace.

Conclusion

Blockchains can be made to operate in different ways, using various mechanisms to secure a consensus on transactions. Bitcoin is the most well-known example that shows how Blockchain Technology has caught the imagination of the people whole world. Many other applications are also embracing different sphere of activities to expand Blockchain’s level of technology and influence.

With its popularity gaining ground world over, the Blockchain technology has started setting new business standards and orders. While it has already made inroads in many areas of business activities, some of them such as banking, cybersecurity, cloud storage, supply chain management, healthcare, transportation, real estate, e voting etc are going to be majorly disrupted in the near future.

Judging by its success and increased use, it seems that Blockchain is poised to rule the digital world of the near cryptocurrency future, making it an absolute necessity for students to know the ins and outs of cryptocurrency.

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