The growing craze about cryptocurrencies has been immense over past few years, and is expected to continue to be so even in the future. Making ourselves familiar with it has become inevitable, so let’s dive in. Cryptocurrency, also known as crypto, is a form of online payment that uses digital currency and is independent of any third-party authority. Digital currency signifies that it is intangible and can only be accessed through intangible digital wallets. Bitcoin, Ethereum, Litecoin, Bitcoin cash, etc. are some popular examples of cryptos. Bitcoin, the very prominent crypto came into existence in the year 2009. David Chaum, an American cryptographer coined the idea of electronic cash, now crypto, in the year 1983.
How does crypto work, and where is it used?
Crypto runs on a digital public ledger called Blockchain. It is a decentralized system which records and maintains the transactions carried out through any of the cryptocurrency. The distributed nature of Blockchain is what makes it most suitable for such transactions. Cryptocurrencies make use of cryptography, a technique of encrypting and decrypting data so that no one other than the sender and receiver can figure out the information about transactions. There exist several ways through which crypto can be created. Mining is one such way wherein computers work out on complex puzzles in order to authenticate the transactions over a network. Every new transaction is added to a block of the continuous chain of ledger. With that understood, applications of cryptocurrencies are quite comprehensible. They can be used to trade real world entities; however, investments have been quite popular interest of users.
Advantages of crypto:
- Easy way of transaction between two parties without involvement of any third party like banks or credit / debit cards.
- Assured anonymity and secure payments.
- Transactions are consistent. Once started, they always go to completion or fail altogether.
Disadvantages of crypto:
- Illegal transactions can be carried out easily as it would be difficult to track such activities due to the secure features of crypto, increasing cyber-crime rates.
- Losing the confidential private key to the crypto wallet might bar the coins within it.
- Mining cryptocurrencies requires complex algorithms which again need high computational speed to function.
It is expected that investing in cryptocurrencies will remain a fashionable trend for years to come. However, it is necessary to understand that the crypto market keeps on fluctuating due to unpredictable ascending and descending factors. A fortune gain in cryptocurrency is attainable and so is suffering a loss. Hence, it is extremely crucial to analyze the risks in the crypto market thoroughly before investing.