Cryptocurrency: The digital currency revolution

Introduction

This is a term that we have been hearing frequently for a long time. Especially from last year, so for those who have some knowledge about the term but want to understand it in more detail, here is a short overview that will clearly explain what a cryptocurrency is, how it works and some common terms related to it. The word “cryptocurrency” came from the techniques of encryption that are utilized to secure the network.

In simple language, a Cryptocurrency is a form of system that allows secure payments online but these are denominated in the type of virtual “tokens”.It is a virtual currency. Cryptocurrency is secured by cryptography which makes it safe on a level that it cannot be spent twice or counterfeited. A lot of cryptocurrencies are decentralized networks that are based on blockchain technology - It is a database of all the crypto transactions that are performed globally. The system is secure so it is nearly impossible to cheat, hack or change it. What attracts a lot of people to cryptocurrency is that they are not issued and controlled by any kind of central authority. Technically they are immune to Government rules and regulations.

Types of Cryptocurrency

As we all are aware, the first cryptocurrency was Bitcoin. It remains the most popular and valuable form of cryptocurrency. Today there are many other cryptocurrencies but they are built on specific blockchain platforms, while Bitcoin is built on its blockchain platform. Let us discuss some of the most common virtual currencies that are preferred and utilized globally.

1. Bitcoin

   The first cryptocurrency was created in 2009 and was launched by Satoshi Nakamoto. Currently, there are 18.84 million Bitcoin tokens that are in circulation. This cryptocurrency depends on blockchain technology which is a decentralized public ledger that assists you in recording Bitcoin transactions. They are independent of any Government or central bank. This is the most  preferred type of cryptocurrency today. There are a lot of Bitcoin miners who stay in different parts of the world. They work on incredibly powerful computers that verify transactions and generate more Bitcoins. They need a process known as proof of work. With the help of this process, the transactions are permanently kept in the network of blockchain which will provide high security to Bitcoin.

2. Ethereum

   One of the other popular blockchain networks is Ethereum. It was designed as a programmable blockchain and it assists users to monetize, publish and even create applications. The payment form used here is Ether. Currently, it comes second to Bitcoin in the cryptocurrencies around the world. It has the advantage that there are no limits in creating ethereum. A lot of people use it and have gained huge profits during the initial coin offering by a lot of companies and investors.

3. Cardano

   One of the preferred cryptocurrencies is a third-generation blockchain platform. The network believes in sustainability and efficiency and does not garner high electric power costs for mining these coins. The Cardano network cryptocurrency is known as ADA.

4. Binance Coin

   One of the top cryptocurrency exchange platforms in the world is Binance. The cryptocurrency that enables exchange on this platform is the Binance coin. They have their finance blockchain platform. The coin was created as a token in 2017 that helped traders receive amazing discounts on the trading fees on Binance. This is very advanced and can be utilized for financial services, payments, bookings, entertainment and even online services.

5. Sol 

   A cryptocurrency is generated by the Solana blockchain platform. It has paved its way in decentralized financing. It has gained a lot of popularity and its value has increased vastly from last year. It has made its way in the growing presence of high qualities in the field of finance.

How does Cryptocurrency work?

Cryptocurrency is a peer-to-peer electronic cash system. It means it is very similar to file transactions where there is no involvement of any central authority or third parties. So, cryptocurrencies are normal transactions or even entries that can be modified upon certain prerequisites. In a blockchain network, each transaction consists of two parties: the receiver and sender, the wallet addresses or public keys and the number of transactions.

These transactions are very safe because to confirm the transaction the sender needs a private key, after the confirmation only the transaction is reflected in the database shared ledger.

The people who have the authority to confirm transactions are the miners within that network. These miners need to solve the cryptographic puzzles to confirm any kind of specific transactions. For their service, they receive a transaction fee in that kind of cryptocurrency. Once when the miners confirm this transaction they will spread it to the particular network and every node in that ledger will be updated automatically. Further once a transaction is confirmed by a miner it will become irreversible and non-modifiable.

Benefits of Cryptocurrency

1. There is user autonomy

   The major benefit of cryptocurrency is that there is no governing board and no controlling power over the investors and users.

2. There is no tracking

   No one can trace your transactions other than you unless you want to make them public.

3. There are no taxes

   There is no taxation system as no third party can intercept your transactions. It is taxable only if the user will voluntarily disclose his percentage value of Bitcoin.

4. There are no transaction costs

   When you invest in stocks or mutual funds, the board will be charging transaction fees. When sending and receiving bitcoins there are no transaction costs.

Your Key Takeaways

1. Cryptocurrencies have been in existence since 1980 theoretically but were only first traded in 2008. Now almost a decade later, it is one of the biggest investment opportunities globally.
2. Some of the popular cryptocurrency examples are Bitcoin, Ehtereum, XRP, Dogecoin, Ripple and many more.
3. It is a digital currency that works like regular currency and has its applications in different countries.
4. The Indian Government does not consider cryptocurrency legal and has often raised concerns against it, but the final judgement will be from the Reserve Bank of India.
5. A lot of companies are now accepting Bitcoin as a form of payment but many are against it too.
6. Some of these known companies are WordPress, Microsoft, Tesla and many other big companies.

So here was a short glimpse about cryptocurrencies, their working and types to understand the concept better.

Lucent Innovation is a full-service software design and development company and an expert e-commerce solution provider. We create custom applications for our clients leading to an improvement in the efficiency, increased growth and profitability of the business. We also build e-commerce websites that are ready to sell, scale and grow.

Contact us for your next project!

info@lucentinnovation.com

Also read: What everyone must know about Payment Gateways?