What is cryptocurrency?
If you are looking to know more about What is Cryptocurrency and How cryptocurrency works and what are the top cryptocurrencies to follow in 2021.
Then check this article till the end …
So, Let’s Start with
What is cryptocurrency?
Cryptocurrencies are digital money in electronic payment systems. Please remember that cryptocurrencies are different from the blockchain.
A blockchain, contains, list of records (say blocks), which are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data.
Blockchain technology can be used for various business use cases. One of the use-cases is cryptocurrency.
Other use cases of Blockchain are, smart contracts, storing land records, citizen identity record,s etc in a temper-proof way.
A cryptocurrency is a digital currency that is secured by cryptography. Many cryptocurrencies are decentralized networks based on blockchain. This makes it very hard/impossible to counterfeit.
Cryptocurrency generally does not require government backing or the involvement of an intermediary, such as a bank.
In cryptocurrency here, users of the system validate payments using certain protocols.
It does not exist in physical form (like paper money), and it is not issued by a central authority.
How does cryptocurrency work?
Cryptocurrencies are virtual “tokens” represented by ledger entries.
They allow performing secure payments. “Crypto” means different algorithm and cryptographic technique that safeguard these entries, such as hashing function, public-private key pair, and elliptical curve encryption.
Types
Bitcoin was the first blockchain-based cryptocurrency, and it’s still valued. Currently, there is a varied alternative like clones or forks of Bitcoin and many others which started.
Other popular cryptocurrencies are Litecoin, Peercoin, Dogecoin, Gridcoin, Ethereum, Ripple, EOS, namecoin.
As per statistics, over 18.6 million Bitcoin circulated in the market with a total cap of approx. $927 billion
Currently, the aggregate value of all cryptocurrencies in existence is around$1.5 trillion, of which Bitcoin represents more than 60% of the total value.
Advantages Associated with Cryptocurrency
Cryptocurrency helps in the easy transfer of funds between two parties, without the need for any third party such as a credit card company or bank.
These transfers are secured by the public key and private keys and various forms of incentive system, like proof of work or maybe proof of stake.
In the current system, a user’s wallet or account address has a public key, while the private key is known only to the owner, which is used to sign transactions.
Disadvantages
Most Important – Illegal activities can be easily carried due to their semi-anonymous nature.
It’s not regulated by any government or central body. So basically, underneath cryptocurrency, there is no intrinsic value.
If you go back in history, you will realize that earlier our ancestor’s used the barter systems.
For example, one farmer needs to give ten kg of rice and in exchange, get various household utensils.
Later, various kingdoms started exchanging gold, spices, metal, food.
Post that they floated their own coins/currencies. Once sovereign nations formed, they crea
ted/floated their own currencies, which were backed, primally by gold.
Normally, a currency is backed by a government. Governments keep a ‘gold’ reserve or equivalent, which determines the value of that currency.
In other cases, underneath a currency, some other underlying (fuel, art-piece, precious metal,) is there.
But in case of cryptocurrency, underlying is only some algorithm !!!
There is always a lot of price volatility because which threat of large losses is always there.
Cryptocurrencies, by their nature, are virtual in nature. Hence, they are not stored on any central database.
It’s very important to take them back up of private keys because a digital cryptocurrency balance can be wiped out by the loss or destruction of a hard drive.
Most Popular Digital Coins and How they are used….
| Coin | Total Market Value |
| Ethereum (CRYPTO:ETH) | $390 billion |
| Binance Coin (CRYPTO:BNB) | $79.5 billion |
| Cardano (CRYPTO:ADA) | $66.3 billion |
| Dogecoin (CRYPTO:DOGE) | $63.4 billion |
| Tether (CRYPTO:USDT) | $58.2 billion |
| XRP (CRYPTO:XRP) | $51.8 billion |
| Polkadot (CRYPTO:DOT) | $30.5 billion |
| Internet Computer (CRYPTO:ICP) | $25.6 billion |
| Bitcoin Cash (CRYPTO:BCH) | $20.1 billion |
| DATA SOURCE: COINMARKETCAP.COM. *AS OF 5/17/2021. |
Below are some of the most important digital currencies.
- Bitcoin is regarded as the first decentralized cryptocurrency using blockchain technology to facilitate payments and digital transactions.
2 Ethereum (ETH)
The first alternative of Bitcoin Ethereum(Ether),
It is a decentralized software platform, and it enables Smart Contracts.
And Decentralized Applications (DApps) to be built and run without any downtime, fraud, control, or interference from a third party.
3.Litecoin (LTC)
Litecoin, which was launched in 2011, was among the first few cryptocurrencies after Bitcoin, and It has often been referred to as “silver to Bitcoin’s gold.”
It was created by an MIT graduate Charlie Lee, an MIT graduate, and former Google engineer.
Litecoin is developed on an open-source global payment network that is not controlled by any government body.
It uses “scrypt” as proof of work.
4.Stellar (XLM)
Stellar was founded by Jed McCaleb,
He was a founding member of Ripple Labs and developer of the Ripple protocol.
Stellar is an open blockchain network designed to provide enterprise solutions by connecting financial institutions for the purpose of large transactions.
Every new technology will have a degree of uncertainty about the future,
And the same case is with cryptocurrency.
While the popularity is growing, and also the demand is growing Still
it is too early to know just how big of an impact cryptocurrency will have in Financial Ecosystem.
As a potential financial revolution,
it’s worth keeping an eye on it and learning and understanding more about it till it becomes legal.
Hope Now you understand the basics of What is cryptocurrency?
