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What is Cryptocurrency?

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Cryptocurrency

Cryptocurrency is designed to make virtual transactions as medium of exchange and is a form of digital currency. This virtual currency or cryptocurrency uses cryptography to verify and secure the transactions. Bascically, Cryptocurrencies are a list of limited entries in a database that cannot be changed untill certain conditions are fulfilled.

Breaking Down 'Cryptocurrency'

Cryptocurrency transactions are well-suited for activities, such as money laundering and tax evasion.
The first decentralized cryptocurrency launched was Bitcoin, during 2009. The decentralized means the use of bitcoin's blockchain transaction database instead of a distributed ledger.

Previously, finding a merchant who accepts bitcoin was a difficult task. Today, the situation is completely different and the merchants are increasing day to day. Since then, numerous cryptocurrencies like PPCoin, Namecoin, and Litecoin have been created. There are more than 700 cryptocurrencies available in online markets for trade, as of early 2017.

What are Cryptocurrency exchanges?

Cryptocurrency exchanges are a kind of digital platforms which allow us to exchange one type of digital assets with another based on the market value of the given assets. Some of the most popular exchanges are Binance and Gdax. Most of the people confuse cryptocurrency exchanges for crypto wallets.

Crypto wallets generally allow you to make purchases with a small range of popular digital assets like Bitcoin and Ethereum, which can be sent to a different exchange to trade. Most cryptocurrency exchanges will allow their users only to trade digital assets for digital assets, but some allow trades of fiat currencies like dollars for cryptocurrencies.

Kraken is an example of exchanging cryptocurrencies for fiat currency, It accepts funds in the form of JPY, USD, GBP and CAD, and supports trades like Ripple, Monero, and Litecoin.

Who accept Cryptocurrencies?

There are many merchants available both offline and online-who accept bitcoin as a mode of payment. These merchants range from large retailers like Newegg and Overstock to mini businesses, restaurants and bars. Bitcoins are used to make transactions and make payments for flights, hotels, apps, computer accessories and even jewellery.

Various virtual currencies such as Ripple, Litecoin, Ethereum and many others are not widely accepted as bitcoin. Apple has started accepting cryptocurrencies as a form of viable payment on App Store.

Cryptocurrency Benefits and Drawbacks

Benefits

  • Transfer of funds among different parties are made easier with Cryptocurrencies.
  • Transfers are conducted through public and private keys upholding security issues.
  • Funds are relatively transferred with minimal processing fees.
  • Cryptocurrencies are potential enough to lower transaction costs and make the process of payment more efficient.

Drawbacks

  • As Cryptocurrencies are virtual and does not possess any central repository, any balance sheet might get wiped out (when a computer crashes) until and unless a backup sheet of the holdings does not exist.
  • The rate of cryptocurrency might fluctuate widely depending on supply and demand.
  • Cryptocurrencies might sometimes suffer to the threat of hacking.
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What is the future of Cryptocurrency?

The market of cryptocurrencies is fast and wide. Every day, new cryptocurrencies emerge, old die, early adopters get wealthy and investors lose money.

Cryptocurrencies are gaining legitimacy as a protocol for business transactions, micropayments, and overtaking the popular remittance tools.  

People all over the world buy Bitcoin to protect themselves against the devaluation of their national currency. Mostly in Asia, a vivid market for Bitcoin remittance has emerged, and the Bitcoin using the darknets of cybercrime are flourishing. More and more companies discover its power and adopting this emerging technology.

The revolution is already happening.

  • Institutional investors start to buy cryptocurrencies.
  • Banks and governments realize that this invention has the potential to draw their control away.

Bitcoin is the way out, and cryptocurrency as A whole is never going away, it’s going to grow in use and acceptance as it matures.

Why Use Cryptocurrencies?

  • Instead of depending on a centralized financial institution to execute and verify transactions, cryptocurrency transactions are "confirmed," by the computers itself within the currency's network.
  • As cryptocurrencies are digital, they can be used in numerous ways that ordinary currencies can't.
  • A very small fee is charged for each transaction.
  • They represent things like consumer goods and domain names.
  • Cryptocurrencies can be transacted irrespective of any city or country, enabling users to deal directly, rather than through a third-party financial institution.
  • Cryptocurrencies are generally safe to use and hard to steal by malicious hackers.
  • Prominent cryptocurrencies are Bitcoin, Darkcoin and Nxt.

Cryptocurrencies: What to Look For

The main characteristics to consider in Cryptocurrencies are.

  • Market Capitalization and Daily Trading Volume

A cryptocurrency's market capitalization denotes the complete worth of all coins in existence.
Daily trading volume: it is the value of the coins that exchange hands every day.

  • Verification Method

Instead of employing the oldest and most common method like proof of work, which requires a massive amount of energy, Proof-of-stake systems lets users verify the transactions. This methodology requires less processing power to operate and claim transaction speeds quicker.

  • Retailer Acceptance

Every user must equip with the knowledge of where a cryptocurrency can be used, before investing on it.

A few cryptocurrencies are widely accepted, among major retailers. However, many have limited acceptance, and can only be exchanged for other cryptocurrencies. Some coins are specifically designed to fulfill variant purposes.

Final Thoughts…

Cryptocurrencies are an exciting new development in the world of finance. No one is quite sure yet where the technology will lead, but the fact remains that these new currencies offer possibilities that traditional cash can't.

Today cryptocurrencies have become a global phenomenon known to most people. Many people, banks, governments, and companies are aware of its importance.

Cryptocurrencies have emerged as a hope that there is a currency which preserves value, facilitates exchange, and is entirely out of the influence of centralized banks and authorities.

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Arogyalokesh
About The Author

Arogyalokesh is a Technical Content Writer and manages content creation on various IT platforms at Mindmajix. He is dedicated to creating useful and engaging content on Salesforce, Blockchain, Docker, SQL Server, Tangle, Jira, and few other technologies. Get in touch with him on LinkedIn and Twitter.


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