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Here’s All You Need to Know About Cryptocurrencies

Cryptocurrency is one such tool that has gained massive popularity in the recent past. Read on to know more about cryptocurrencies.

Money lies at the centre of every human need. It is the most basic component required to survive for any individual. It allows humans to buy food, to acquire shelter and provide for themselves and their family.

The history of money is also very interesting. Centuries ago, trading used to happen through goods. This was called the barter system where you exchanged a good that you have in surplus, in return of a good that you need. Then came coins; metallic objects used as currency in order to purchase things. Then cash, or currency notes came into existence.

Currency notes and coins were the common denomination for the longest time After the dot com boom and the IT (Information Technology) revolution in the 1990s, debit cards, credit cards, net-banking, and digital wallets came into prominence.

In the recent years , cryptocurrency has jumped into prominence. Let’s discover exactly what it is.

What is Cryptocurrency?

A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets.

Cryptocurrencies, unlike other currencies, are user-operated and not monitored by a bank, financial institutions or government. 

Cryptocurrencies use decentralized control as opposed to centralized digital currency and central banking systems. The decentralized control of each cryptocurrency works through distributed ledger technology, typically a blockchain, that serves as a public financial transaction database.

In 2009, Bitcoin released as the first open-source software, and is known to be the first decentralized cryptocurrency.

Prominent Cryptocurrencies

  • Bitcoin
  • Litecoin
  • Ethereum
  • Zcash
  • Dash
  • Ripple
  • Monero

Advantages and Disadvantages

The benefits of using cryptocurrencies are as follows:

Convenient for the User

In case of a bank account, you need to provide several personal details about yourself. You need to go through several approvals and authorizations. This can be tedious. But in case of cryptocurrencies, you only need the internet to create a wallet and to carry out a transaction.

Decentralized System of Payment

Most of the cryptocurrencies have no central authority to control, the network is distributed to all participants, and each computer mining nodes is a member of this system. Hence, even if a certain part of the network were to go offline, the system and the other servers remain intact, and help facilitate all transactions that go through.

Free and Unlimited Transactions

When you use your credit card, there is a charge levied on each transaction for availing the bank’s credit facility. In case of a savings account, you can make only a certain number of transactions each month. These complications do not exist with cryptocurrency.

The downsides of using cryptocurrencies are as follows:

Volatile in Nature

One of the major downsides of using cryptocurrency is its volatility. The prices go up and down very quickly, based on no clear market metrics. This is a primary reason why mass adoption of cryptocurrencies hasn’t happened and why governments don’t endorse it.

Reversal of Payment is not Possible

This is a crucial requirement when it comes to making financial transactions. When you type in a wrong account number, or put down an extra zero while writing down the amount, your bank helps you reverse that transaction. In case of cryptocurrencies, that is not possible.

Lack of Information

People don’t have a lot of knowledge on how cryptocurrencies exactly work. Hackers might find it easier to hack into your account if you don’t know what process to follow or what information to give out when you’re investing through, say, Bitcoins.

Going forward, no one really knows what the future is going to be for cryptocurrency. Whether more people will adopt it and it will become the means for carrying out everyday transactions, or whether the hype will dye only for it to become obsolete. Only time will tell.

However, if you want to join the bandwagon, only put the amount of money that you will be able to survive if you don’t get it back.   

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