A digital currency made with encryption techniques is called cryptocurrency. This is an alternative method of payment. Alternatively referred to as digital currency, virtual currency, or cryptocurrency. It is the first digital asset to be widely accepted as a valid payment method online and offline across the globe.
You need a cryptocurrency wallet in order to use cryptocurrency. These wallets are computer programs that you can store on your computer, mobile device, or cloud-based service.
Cryptocurrency is commonly used as a centralized digital currency and uses decentralized control as opposed to a centralized banking system.
What is Cryptocurrency?
Crypto currency is a digital payment system where banks do not verify transactions. It is a peer-to-peer system through which users can make payments to anyone at any time. It does not require users to physically carry currency with them or exchange currency. Payments in cryptocurrencies are performed through specific transactions, where the payment is entered into an online database. Whenever someone transfers cryptocurrency funds, this transaction is recorded in a public database. Crypto currencies are stored in digital wallets.
Crypto currency got this name due to the use of encryption while verifying transactions. This means that the wallet uses advanced level coding from storing crypto currency to transactions. Encryption is primarily used to ensure safety and security. Bitcoin is the most famous and the first crypto currency that started in 2009.
How does Cryptocurrency work?
As we already know crypto currency is a digital payment system. One part of this system is the physical currency and the second and very important part is the blockchain network that supports such digital currency transactions.
Crypto currency transactions work in conjunction with a crypto wallet and contain information such as public and private keys or passwords. An individual’s account is identified by these keys or information. In a crypto currency transaction, both parties first exchange their wallet keys to confirm their identity and then initiate a transaction that is recorded on the blockchain. The transaction process is verified through special process analysis and complex cryptographic mathematics.
This blockchain process ensures that all transactions are secure. Crypto currency also provides a universal approach to digital currency, enabling cryptocurrency to work anywhere without limitations.
Types of Cryptocurrency
The first type of crypto currency, Bitcoin, is the most used, valuable and popular crypto currency in the world to date. Along with Bitcoin, other alternative crypto currencies have been developed with varying degrees of functionality and specifications. Some are based on the concept of Bitcoin, while others are reinvented.
The Bitcoin currency was started in 2009 by an anonymous person named Satoshi Nakamoto.
Altcoin crypto currencies were formed as a result of the popularity of Bitcoin. Also, Litecoin, Peercoin, Namecoin, Ethereum, Cardana, and Dogecoin are some of the more well-known crypto currencies.
Ethereum – This crypto currency network uses decentralized software and creates intelligent security on the network. This safeguard helps to avoid any kind of fraud. The token used to enable transactions on this network is Ether.
Doge coin – This crypto currency is named after the image of a Shiba Inu dog on the coin. It became a popular meme leading to super high prices due to Tesla owner Elon Musk endorsing it. There is no upper limit to its no. You can own as many coins as you want.
Cardana – It is a research-based crypto currency coin managed by a team of experts such as engineers, mathematicians or cryptographers. It is known as a more balanced and sustainable currency.
Lite coin – Although similar to other coins, it is known for faster transaction times because it generates blocks at a faster rate. It was created in 2011 by Charlie Lee who was working as an engineer at Google.
A distributed ledger system called Ripple was established in 2012. It is possible to trace more than simply crypto currency transactions with Ripple. The developers of Ripple collaborate with a number of banks and financial organizations.
Blockchain Technique
The main piece of data within a block is the hash pointer, which serves as a link to previous blocks, a timestamp, and transaction data. For this reason, blockchains are designed to be immutable.
Blockchain can be managed by a peer-to-peer network for verification and consensus purposes.
Once a block is recorded, the data within that block cannot be changed, unless every subsequent block is changed, which can support a vast majority of computers on the network.
How to buy Cryptocurrency?
To buy cryptocurrency you need to follow some steps
Step 1: Platform selection
First, you need to decide which platform you want to choose A bitcoin exchange, or a conventional broker are your options.
Conventional Brokers: Buying or selling crypto currencies is now possible using a lot of online brokers.
These brokers also offer options on bonds, stocks and other financial assets along with cryptocurrencies.
Crypto currency Exchanges: Exchanges are also a good option for buying cryptocurrencies. These exchanges offer crypto currency, wallet storage, interest bearing account options.
Before opting for these platforms, you need to see how much they charge and what features you get on them
Step 2 : Fund the account
Once you choose the platform, the next step is to fund your account, so you can start trading. The majority of cryptocurrency exchanges let users purchase crypto currency with fiat money or money issued by governments, such US dollars, British pounds, or euros. Credit card purchases of cryptocurrency are regarded as dangerous, and some exchanges do not accept credit cards. Cryptocurrencies are highly volatile, so they should not be bought with a loan. Some platforms accept transfers and wire transfers.
Step 3: Placing the order
After funding the account, you need to place an order for cryptocurrency on the web or mobile platform of the broker or exchange. Along with this, users can also invest in cryptocurrencies through fintech apps like PayPal, Cash App, and Venmo. Users can buy or sell cryptocurrency through this app.
How to store Cryptocurrency?
Once you buy cryptocurrency, you need to keep it secure by protecting it from hackers or thieves. Cryptocurrencies are usually stored in crypto wallets, which are physical devices and online stores. Some crypto exchanges also offer wallets to users. There are two types of wallets used to store cryptocurrencies – hot wallets and cold wallets.
Hot Wallet Storage: Online software is used to store cryptocurrency in hot wallets. Users do not have to pay any kind of charge for this.
Cold wallet storage: It uses offline electronic devices to store cryptocurrency. Users have to pay for this wallet.
Advantages of Cryptocurrencies are:
The use or popularity of cryptocurrency is increasing day by day. Some of the benefits of cryptocurrency are listed below.
- Since cryptocurrency is a digital currency, there is no possibility of it being counterfeited or tampered with.
- Being a digital currency, there is no printing cost for cryptocurrency.
- Since cryptocurrency is a digital currency, it does not take much time to send from one place to another.
- Since there is no central institution of cryptocurrency, it does not have any fixed terms or guidelines.
- No charges are deducted for exchanging cryptocurrencies.
- You can convert cryptocurrency into cash through a special ATM Card.
- Cryptocurrencies are not controlled by any group or government or state.
- Cryptocurrency is suitable for investment because its rate of increase in value is very high.
- No bank is required for cryptocurrency exchange.
Disadvantages of Cryptocurrencies are:
Now let’s know what the disadvantages of cryptocurrency are.
- Since cryptocurrency is not regulated by any government or state, its value fluctuates a lot.
- Cryptocurrencies being digital currencies have limited chances of being hacked.
- Cryptocurrencies have no real existence.
- Once cryptocurrency is accidentally exchanged, it is impossible to recover it.
- Cryptocurrencies are not legalized by the governments of some countries.
- Uses of cryptocurrencies are limited.
- Illegal activities can be conducted using cryptocurrency.
Rather than being created by a central bank or government, cryptocurrency units are typically run through a decentralized technological process. This is why cryptocurrencies are often described as decentralized. Cryptocurrencies are generally not controlled or managed by any single entity, country or region. They require volunteer work around the world to verify and authenticate transactions.
