What is Cryptocurrency: Everything A Beginner Needs To Know
We all live in an era where digitization has taken the ace position in almost all fields. It is not only simplifying the work process but also connecting and updating us to the entire world in seconds.
The influence of digitization cannot be ignored when it comes to virtual currency. By virtual currency, we meant cryptocurrencies such as Litecoin, Bitcoin, and Peercoin which are gaining popularity day by day.
According to statistical reports, bitcoin value is reaching new highs in 2018, enhancing interest in all cryptocurrencies. Moving further, let’s discuss how to utilize this in saving, earning, and spending.
What is Cryptocurrency?
Cryptocurrency is a virtual or digital currency that works through encryption techniques and is used to evaluate and generate its release. Unlike authorized currency such as euros, US dollars, and yen- cryptocurrency cannot be controlled or regulated by any centralized financial authorities or government.
It depends upon the power of the Internet to ensure its value and validate transactions. Every transaction gets verified by users on a network that eventually gets into the public record. The process prevents repeated use of the same digital currency by the same person.
How are the Records of Cryptocurrency Maintained?
The digital public ledger upon which the records of all transactions are maintained is called the blockchain. This data is safely stored in a network and hence it is not subject to misuse by central failure or hackers.
Every single record or a series of records present on the blockchain is termed as a block. On sending a block to the network, it gets verified as a genuine transfer and is added to the blockchain. Once validated, it cannot be altered.
What does it mean to mine Cryptocurrency?
A process through which cryptocurrencies are introduced to the world is known as ‘mining’. In order to mine this currency, you need to solve a hash (a computational puzzle) through which you can add the next block. All these transactions are then noted in the blockchain and are made available for us to see.
People all over the world compete to be the first solver of hash. Whoever succeeds in solving this gets rewarded with either a block or an amount of the cryptocurrency they mined.
How to buy Cryptocurrency and utilize it?
Cryptocurrency is an unstable market where the rates of exchange can greatly fluctuate by day, or sometimes even by the hour. Bitcoin is one of the most popular and valuable cryptocurrencies out there, but there are several others to explore such as Peercoin, Monero, Ripple, Lecoin, and ripple.
When you are given cryptocurrency as a means of exchange, you are actually given a digital key for addressing that particular currency. This digital key can be utilized to access, authenticate, or approve transactions.
All you need is a place where you can keep your digital currency safe. This is where a cryptocurrency wallet comes to play.
You can choose from a wide range of cryptocurrency wallets. A few have been mentioned below:
1) Online wallets: Exchange platforms such as Circle or Coinbase can be used for safe storage and easy access to the digital keys online.
2) Desktop wallets: Cryptonator is software that can be used to store and send cryptocurrency addresses and get connected to the network in order to keep a track of the transactions.
3) Paper wallets: There are a few websites that offer services on a paper wallet where a piece of paper is generated with QR codes present on it. One code is meant for the public address on which you will receive cryptocurrency and the other one is meant for your private address for spending.
4) Mobile wallets: Encryption and storage of bitcoin keys are maintained through apps like Blockchain which can be further utilized for making payments via mobile.
5) Hardware wallets: You can also make use of a USB device for storing bitcoin and your private address keys electronically.
Why are the Benefits of using Cryptocurrency?
While you are already accustomed to debit and credit cards (the two mediums to digitize your rupee, dollar, or euro, there are some benefits of using cryptocurrency over them.
1) Identity Safeguard: When making payments through credit or debit cards, it needs the submission of confidential banking details that are at the risk of getting stolen or misused. On the other hand, cryptocurrency can be used to make transactions directly without the need of putting any such information.
2) Ownership: Unlike liquid cash kept on banks, cryptocurrency can be accessed solely by the owner. Your digital key cannot be locked or limited by any entity.
3) Accessibility: A lot of people can access the internet, but not everyone has access to money exchange systems or banks. Cryptocurrency provides easy access to transact money electronically without the need for any bank or line of credit.
4) Risk-Free for Sellers: Since payments made in cryptocurrency cannot be reversed, merchants do not have any risk w.r.t sopped payments. The presence of blockchain makes the system fraud-free.
5) Low Transaction Charges: Since miners are rewarded with cryptocurrency from the network itself, there are no charges required for core transactions.
What are the Most Prominently used Cryptocurrencies?
Among the huge number of cryptocurrencies in use today, below mentioned are the heavy hitters of the market.
Are there any Disadvantages of using Cryptocurrency?
Many people still do not have a clear understanding of the concept of cryptocurrency.
1) Lack of awareness: Although many entrepreneurs and common people have already started accepting cryptocurrency, this number is less as compared to those who still rely on debit and credit cards.
2) Volatility: The rates of exchange greatly vary in cryptocurrency. In other words, the amount on which you purchase or sell today could be completely different the next day. Although the market will settle down eventually it is difficult to predict the rates.
3) Newness: Even popular Cryptocurrencies like Bitcoin is still new and is expanding. Hence it may take some time for other Cryptocurrencies to reach the peak of popularity.