All About Cryptocurrency
A cryptocurrency is also a medium of exchange just like the paper money we normally have in our wallets. So, cryptocurrency is a digital asset which is designed to be used as a medium of exchange and can be called as a virtual money or digital currencies. Cryptocurrencies are no physical money like the one which we can see instead they are just digits of great value. A defining feature of a cryptocurrency and its most enduring allure is its organic nature. Which means it is not issued by any central authority, rendering it immune to government interference and manipulations. The decentralized cryptocurrency is produced by entire cryptocurrency system collectively as it is not governed by any company or government new units cannot be produced so here the rate is been decided at the time of creation and publicly known.
How cryptocurrencies work?
Cryptocurrency secure their transactions by cryptography, which makes cryptocurrencies almost difficult to counterfeit. All confirmed transactions from the start of a cryptocurrency’s creation are stored in a public ledger. The identities of the coin owners are encrypted, and the system uses other cryptographic techniques to ensure the legitimacy of record keeping. The ledger ensures that corresponding “digital wallets” can calculate an accurate spendable balance. Also, new transactions can be checked to ensure that each transaction uses only coins currently owned by the spender.
The transactions here refer to the transfer of funds between two digital wallets. That transaction gets submitted to a public ledger and awaits confirmation. When a transaction is made, wallets uses an electronic signature which is an encrypted piece of data called a cryptographic signature that provides a mathematical proof that transaction is coming from the owner of the wallet.
Mining is the process named for the arrival of new cryptocurrencies, Mining in simple terms is a process for confirming a transaction and adding them to a public ledger. To add a transaction to the ledger, the “miner” must solve an increasingly-complex computational problem (sort of like a mathematical puzzle). Mining is open source, so anyone can confirm the transaction. The first “miner” to solve the puzzle adds a “block” of transactions to the ledger. The way in which transactions, blocks, and the public blockchain ledger work together ensures that only one individual can easily add or change a block at will. Once a block is added to the ledger, all correlating transactions are permanent, and a small transaction fee is added to the miner’s wallet (along with newly created coins). The mining process is what gives value to the coins and is known as a proof-of-work system.
Advantages of cryptocurrency.
Fraud: Individuals cryptocurrencies are digital and cannot be counterfeited or reversed arbitrarily by the sender, as with credit card.
Lower Fees: There aren’t usually transaction fees for cryptocurrency exchanges because the miners are compensated by the network.
Identity Theft: When you give your credit card to a merchant, you give him or her access to your full credit line, even if the transaction is for a small amount. Credit cards operate on a “pull” basis, where the store initiates the payment and pulls the designated amount from your account. Cryptocurrency uses a “push” mechanism that allows the cryptocurrency holder to send exactly what he or she wants to the merchant or recipient with no further information.
Access to Everyone: There are approximately 2.2 billion individuals with access to the Internet or mobile phones who don’t currently have access to the traditional exchange, these people are primed for the Cryptocurrency market.
Decentralization: A global network of computers use blockchain technology to jointly manage the database that record transactions. That is, cryptocurrency is managed by its network and not any one central authority.
Recognition at universal level: Since cryptocurrency is not bound by the exchange rates, interest rates, transactions charges or other charges of any country; therefore, it can be used at an international level without experiencing any problems. This, in turn, saves lots of time as well as money on the part of any business which is otherwise spent in transferring money from one country to the other. Cryptocurrency operates at the universal level and hence makes transactions quite easy.
Future of cryptocurreny
Though cryptocurrency is backed by so many advantages it has some disadvantages too despite great recognition cryptocurrency is not accepted widely, not every individual or organization accepts cryptocurrency which makes it a major setback. Also, transactions made using cryptocurrency cannot be reversed suppose if you send some fund to a scammer you lost it completely. Limitations that cryptocurrencies presently face such as the fact that one’s digital fortune can be erased by a computer crash, or that a virtual vault may be ransacked by a hacker may be overcome in time through technological advances. What will be harder to surmount is the basic paradox that bedevils cryptocurrencies the more popular they become, the more regulation and government scrutiny they are likely to attract, which erodes the fundamental premise for their existence.
A cryptocurrency that aspires to become part of the mainstream financial system may have to satisfy widely divergent criteria. It would need to be mathematically complex (to avoid fraud and hacker attacks) but easy for consumers to understand; decentralized but with adequate consumer safeguards and protection; and preserve user anonymity without being a conduit for tax evasion, money laundering, and other nefarious activities. Since these are formidable criteria to satisfy, is it possible that the most popular cryptocurrency in a few years’ time could have attributes that fall in between heavily-regulated fiat currencies and today’s cryptocurrencies?
Starting at now, cryptocurrency is gradually and relentlessly merging its position. Both developed as well as developing countries are authorizing and managing the use of cryptocurrency. Singapore and Switzerland are the most developed nations in the use of cryptocurrency as of now. Unmistakably, the advantages do overcome the disadvantages, and this is the reason why the base of cryptocurrency is increasing.
There are a lot of cryptocurrencies existing nowadays, some of them are listed below:
- Bitcoin: Launched in 2009 has made a significant impact that it is impossible to deny the success bitcoin has had. Even though Bitcoin has some problems that need addressing, such as scalability and privacy, it has become the world’s leading cryptocurrency with relative ease. Bitcoin is designed to make global transactions possible and boost financial inclusion. Moreover, thousands of merchants all over the world have started accepting bitcoin payments, both in the online and offline world.
- Ethereum: Over the past year or so, many people have compared Ethereum to bitcoin. That is like comparing apples and oranges since both ecosystems are nothing alike. Ethereum focuses on the technical side of blockchain development, including native tokens, smart contracts, and decentralized applications. It is possible these features will come to bitcoin in the future, but it is good to have some competition among cryptocurrency ecosystems.
- Ripple: Ripple was launched by OpenCoin, a company founded by technology entrepreneur Chris Larsen in 2012. Like Bitcoin, Ripple is both a currency and a payment system. The currency component is XRP, which has a mathematical foundation like Bitcoin. The payment mechanism enables the transfer of funds in any currency to another user on the Ripple network within seconds, in contrast to Bitcoin transactions, which can take as long as 10 minutes to confirm.
- Litecoin: Litecoin is regarded as Bitcoin’s leading rival at present, and it is designed for processing smaller transactions faster. It was founded in October 2011 as “a coin that is silver to Bitcoin’s gold,” according to founder Charles Lee. Unlike the heavy computer horsepower required for Bitcoin mining, Litecoins can be mined by a normal desktop computer. Litecoin’s maximum limit is 84 million – four times Bitcoin’s 21-million limit – and it has a transaction processing time of about 2.5 minutes, about one-fourth that of Bitcoin.
- Monero: When it comes to finding anonymous cryptocurrencies, one has to look well beyond bitcoin and others. Monero is leading the charge in the anonymity race due to some innovative concepts. Monero has also been embraced by darknet markets because it provides privacy and anonymity one cannot find in bitcoin. Other use cases for Monero are somewhat limited, though.
- Dash: One of the main thing that Dash does well is providing its users with additional privacy when completing transactions. The network of Dash Masternodes provides these services, while also incentivizing users to not spend their wallet balance. Additionally, Dash is making quite an impact in the point-of-sale industry, through strategic partnerships. All things considered, Dash provides a valuable service to people looking for those specific traits.
- MintChip: Unlike most cryptocurrencies, MintChip is actually the creation of a government institution, specifically the Royal Canadian Mint. MintChip is a smart card that holds electronic value and can transfer it securely from one chip to another. Like Bitcoin, MintChip does not need personal identification; unlike Bitcoin, it is backed by a physical currency, the Canadian dollar.