Cryptocurrency — The Future of Finance?
It’s been quite a few months since I got into the world of cryptocurrencies, and to be honest, this world is very vast and deep, which does not seem from the outside.
So let’s get our hands dirty and understand the world of cryptocurrencies.
What is cryptocurrency?
Cryptocurrency is a digital payment system that is based on cryptography, which controls the generation of units of currency and verification of transactions for the transfer of funds.
A cryptocurrency is not backed by a government or a central bank of any country because they take the power out of centralized power centers, whether they are governments or central banks. That’s why such money has many advantages over FIAT currency (currencies that are backed by the government)
But do you know which technology is used behind cryptocurrency?
Blockchain is the core technology behind cryptocurrency. Let’s first understand what exactly blockchain is, and then we will move forward.
What is a blockchain?
A blockchain is a digital, public ledger that records online transactions. Blockchain is the core technology for cryptocurrencies. A blockchain ensures the integrity of a cryptocurrency by encrypting, validating, and permanently recording transactions. A blockchain is similar to a bank’s ledger but open and accessible to everyone who utilizes the cryptocurrency.
More information about blockchain will be covered in the upcoming blogs. For now, let’s try to understand the types of cryptocurrencies.
What is a Bitcoin?
Bitcoin is a digital or virtual currency that uses peer-to-peer technology to facilitate instant payments. It was created by a person called Satoshi Nakamoto in 2009, whose identity is still a mystery for everyone (Interesting fact: Many people believe that he should get a Nobel prize for the invention of Bitcoin.)
After Bitcoin was introduced into the market, it solved the major problem in electronic cash called “double spending.” Double Spending is the risk that a digital currency can be spent twice. If the same money can be spent twice, the currency will lose its value as it is not secure. Bitcoin solved this problem and hence opened the gates of the new world.
What are the other cryptocurrencies than Bitcoin?
Bitcoin was the first cryptocurrency. All cryptocurrencies other than Bitcoin are called Altcoins (alternate coins). Currently, there are more than 1900 altcoins available in the market. You can read about them here: https://coinmarketcap.com/.
There are many Altcoins available in the market which are known to be a clone of bitcoin claiming to be better than bitcoin in features which may be listed in the above link.
Benefits of Cryptocurrency
- Privacy: It allows us to stay anonymous while doing transactions as the system is powered by the use of different cryptographic techniques. These methods ensure data protection to avoid information falling into the wrong hands. All data transmitted is hidden from unauthorized persons.
- Security: Transactions carried out using cryptocurrency can’t be changed or canceled, and it’s transmitted in extremely high-security networks. However, financial records can still be traced for proof.
- Access and efficiency: In a world where there’s still a large population without access to formal financial services, cryptocurrency offers a viable and concrete solution.
Cryptocurrency itself holds the power of changing the whole financial system and, in the future, as the technology develops, more sectors will acknowledge and accept cryptocurrency as a viable financial system, and hence cryptocurrency could become the new conventional financial system in the future.
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Cryptocurrency — The Future of Finance? was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.
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