Want to be
a crypto expert? Well, I have got your back. Cryptocurrency is something that
everyone wants to talk about. But only a few of them know. So, let's discuss cryptocurrency.
(Photo: The Economic Times)
Since man
evolved, the currency has become a part of our lives. Before the caveman used
the "Barter System". In the barter system, a commodity was exchanged
for another commodity. However, the barter system fell out as it had some
flaws. Then the modern currency as we know it came into existence. In 110 BC,
an official currency was minted. In 1250 AD, gold-plated florins were
introduced. And in 1600 AD - 1900 AD, the paper currency gained popularity.
This is how modern currency came into existence. There's a centralized
regulatory authority to limit the modern currency. Now imagine the scenario of
doing an online transaction. This transaction takes place successfully but
there are several ways this could have gone wrong like a technical issue,
account hack, or the transfer limit must have exceeded. This is why the future
of currency lies with cryptocurrency.
Imagine a
transaction between two people in the future. One of them has the bitcoin app
and there's a notification asking whether they are ready to transfer 5
Bitcoins. If yes, then processing takes place. All of this happens in a matter
of seconds. This in return removes all the flaws of modern banking. There's no
limit to the funds which you can transfer, your accounts cannot get hacked and
there's no central point of failure.
So,
cryptocurrency is a digital or virtual currency that is secured by
cryptography, which makes it nearly impossible to counterfeit. There are
thousands of cryptocurrencies. Cryptocurrency is quite similar to any physical
currency, it's just that it does not has any physical embodiment.
Features of
Cryptocurrency:
1. There's
a limit to how many units can exist.
2. Easily
verifies the transfer of funds.
3.
Operating independently of a bank.
4. Working
in a decentralized manner.
5. Allows
new units to be added only after certain conditions are met.
So, what
makes cryptocurrency so special?
1. Little
to no transaction cost.
2. 24/7
access to money.
3. No
limits on purchases and withdrawals.
4. Freedom
for anyone to use.
5. International
transactions are faster.
What's the
"CRYPTO" in cryptocurrency?
Crypto
refers to cryptography. It is a method of using encryption and decryption to
secure communication in the presence of third parties with ill intent.
Cryptography usually requires a computational algorithm (like SHA256), a public
key (that the user shares with everyone), and a private key (which acts as a
digital signature of the user).
Now let's
talk about a normal bitcoin transaction. First, you have the transaction
details. Now, these details who you want to send to and how many bitcoins you
want to send. Then it's passed through a hashing algorithm. For Bitcoin, we use
the SHA256 algorithm. The outcome which you get is passed through a signature
algorithm with the user's private key. This is used to uniquely identify the
user. This output is then distributed across the network with the sender's
public key. The people who verify the transaction to check whether it’s valid
or not are known as MINERS. Now after this is done, the transactions are added
to the blockchain where they cannot be changed again.
Now let's
talk about the biggest cryptocurrency. Not every crypto coin is good. The top
two are Bitcoin and Ether. The similarities between these two are:
1. They are
the biggest and most valuable cryptocurrencies.
2. Both of
them use blockchain and mine currency using proof of work.
3. Widely
used across the globe.
The
differences between these two are:
1. Bitcoin
is used to send money to someone. Ether is used as a currency in the Ethereum
network.
2. Bitcoin
transactions are manual. Ether transactions are manual or automatic.
3. Bitcoin
is slow. It takes 10 minutes to perform a transaction. Whereas, Ether is fast.
It takes about 20 seconds to perform a transaction.
4. Bitcoin
is used as money for real-world transactions. Ether is used to power the
Ethereum network and power real-life transactions.
5. Bitcoin
is used for transactions involving goods and services. Ether uses blockchain to
create a ledger that triggers a transaction when a condition is met.
6. Bitcoin
uses an algorithm known as SHA256 for hashing. Ethereum uses the Ethash
algorithm for hashing.
How to
invest in cryptocurrency?
Everything
in life involves risk and so does crypto. One needs to have proper knowledge to
start investing. The first thing which we need to do is to find a crypto
exchange. We need to do a detailed background check. Some of the popular
exchanges in India are Wazir X, Coin DCX, and Coin Switch Kuber. The next step
is to create an account. Once it gets created, we need to deposit the amount to
buy bitcoins. Then pick a crypto coin. And then you can get started.
The Future
of Cryptocurrency
Before
people used to invest in gold and real estate. With time, the return decreased.
It was only after this when cryptocurrency started rising. This digital coin has
very fast gained popularity mainly because of the support from billionaire
tycoons like Elon Musk, Jack Dorsey, and Michael Novogratz. More and more
people are getting drawn towards it especially after the pandemic. It has
gotten so high after the COVID happened. Lots of countries printed trillions of
dollars. Investors have doubled their amount. However, cryptocurrency is
predicted to face a conflict between regulation and anonymity. Futurists
believe that by 2030, cryptocurrencies would occupy 25% of national currencies.
There have also been demands to classify Bitcoin as an asset class in India.
India is currently on the cusp of the next phase of the digital revolution. And
blockchain and cryptocurrency will be an integral part of it.
