What is Cryptocurrency and how does it work?
• Cryptocurrency - Meaning and Definition
Cryptocurrency, sometimes called crypto-currency or crypto, is any form of currency that exists digitally or virtually and uses cryptography to secure transactions. Cryptocurrency does not have a central issuing or regulating authority, instead using a decentralized system to record transactions and issue new units.
• What is Cryptocurrency?
Cryptocurrency is a digital payment system that does not rely on banks to verify transactions. It is a peer-to-peer system that enables anyone to send and receive payments anywhere. Rather than moving and exchanging physical money in the real world, cryptocurrency payments exist purely as digital entries in online databases describing specific transactions. When you transfer Cryptocurrency funds, the transactions are recorded in a public ledger. Cryptocurrencies are stored in a digital wallet.
Cryptocurrency got its name because it uses encryption to verify transactions. This means that advanced coding is involved in storing and transmitting cryptocurrency data between wallets and public ledgers. The purpose of encryption is to provide security and protection.
The first cryptocurrency was Bitcoin, which was established in 2009 and is still best known today. Much of the interest in cryptocurrencies is to trade for profit, with speculators at times causing prices to skyrocket.
• Cryptocurrency Example:-
There are thousands of cryptocurrencies. Some of the most famous include:
1) bitcoin:
Founded in 2009, bitcoin was the first cryptocurrency and is still the most traded. The currency was developed by Satoshi Nakamoto – widely considered a pseudonym for an individual or group of people whose exact identity remains unknown.
2) Ethereum:
Developed in 2015, Ethereum is a blockchain platform that has its own cryptocurrency, called Ether (ETH) or Ethereum. It is the most popular cryptocurrency after bitcoin.
3) Litecoin:
The currency is similar to bitcoin but has evolved more quickly to develop new innovations, including a process allowing faster payments and more transactions.
4) Ripple:
Ripple is a distributed ledger system that was established in 2012. Ripple can be used to track a wide variety of transactions, not just cryptocurrencies. Behind this the company has worked with various banks and financial institutions.
Non-Bitcoin cryptocurrencies are known collectively as "altcoins" to distinguish them from the original.
• What is Bitcoin?
Bitcoin was invented by Satoshi Nakamoto in 2009. But nowadays no one knows about this inventor of Bitcoin. The same Satoshi Nakamoto is claimed from time to time by different people in different places. But to date, the true programmer of this bitcoin cryptocurrency has not been identified.
Many programmers today are trying to make Bitcoin more secure and robust. The main purpose behind the introduction of Bitcoin was to transfer currency from one place to another without the intervention of any third party or central government. And the software needed for this has been developed all over the world.
Bitcoin is the oldest cryptocurrency in the world. The price of Bitcoin has been steadily rising as more and more people are buying it.
To give an example, in 2016, the price of a bitcoin was around 30,000, but today in 2021, the price of the same bitcoin is more than 40 lakhs. And because of this the price is constantly changing according to the demand.
• Is cryptocurrency legal?
Whether cryptocurrency is legal or illegal depends on the country in which you are using it. This means that it is legally permitted in many lands. It has been banned in many countries.
Bitcoin cryptocurrency is officially recognized in many large countries like Japan, USA, Germany, France etc. Similarly, in Nepal, Algeria, Bangladesh, Bolivia, etc., it has not yet received legal recognition.
All types of cryptocurrencies were banned in India in 2018. But the ban was lifted by March 2020. So now anyone in India can buy and sell this cryptocurrency.
• What is a blockchain?
Blockchain technology is used for cryptocurrency.
Blockchain is simply a chain of blocks - or a list of records. In which various forms of information are stored in large quantities - in real time.
And each chain is related to the information in our previous chain. This information cannot be changed once it is recorded.
It's like putting information in a locked box and putting one of these boxes in one. So it was very difficult to tamper with him.
As a result, these transactions become very secure and it is not possible to hack the system.
Blockchain technology is considered to be the safest for online transactions.
Moreover, there is secrecy in it. And transactions only take place between two people or computers. So no one else has control over it. That is why blockchain transactions are considered democratic or free.
• History of cryptocurrency
In 1983, American cryptographer David Cham created cryptographic electronic money called e-cash. It was implemented in 1995 through Digicash. This first cryptographic electronic payment in the form of banknotes required software. This software is completely encrypted. Encrypted-key is a special type of key given to the recipient of cryptographic electronic money by software. Using this software, the issuing bank, government or other third party could not track the transaction. In 1996, the US National Security Agency published a paper describing the cryptocurrency system. In 2009, Satoshi Nakamoto created a cryptocurrency called Virtual Bitcoin. Only then did cryptocurrency gain worldwide popularity.
• How is cryptocurrency created?
Cryptocurrencies are created from mining. This is virtual mining in which a very complex digital puzzle has to be solved to get cryptocurrency. Solving this puzzle requires your own algorithm (programming code) as well as a lot of computer power. So theoretically it can be said that anyone can create cryptocurrency, but in practice it is very difficult to create.
• Loss of cryptocurrency
Everything has its advantages and disadvantages. Now that we have looked at the advantages of cryptocurrency, let's look at the disadvantages.
1) The biggest disadvantage of cryptocurrency is that no one has control over it
2) The second disadvantage is that it is a digital currency. So it can be hacked