The technology is so rapidly advancing now a days that it has brought some major changes in the society. One major development in the economy and finance sector is the invention of cryptocurrency. It has influenced the way of transactions and trading business.
A cryptocurrency is a virtual/digital currency, that uses encryption techniques to safeguard, verify and manage transactions along with controlling the creation of new units of a particular cryptocurrency. They are also known as virtual currencies, digital currencies, alternative currencies or altcoins. Bitcoin was the first cryptocurrency created in the year 2009. Since then, thousands of other virtual, peer-to-peer currencies have emerged to attempt to emulate Bitcoin’s success. Few cryptocurrencies also attempt to address perceived short-comings in Bitcoin and to provide competitive advantages. Few popular ones include Ethereum, Ripple, Bitcoin Cash, Litecoin, Cardano, NEO, Stellar, EOS, Dash, IOTA, OmiseGo etc.
The value of cryptocurrency lies in the fact that it is desirable and limited in quantity. Bitcoins are desirable because they facilitate transactions without middlemen such as banks or PayPal and there are lots of people ready to accept them. Other cryptocurrencies such as Litecoin are less widely used for transactions. Therefore, they are less desirable. Cryptocurrencies are limited in quantity because there is usually a cap on how many can be mined. For Bitcoins it is 21 million whereas, for Litecoins, it is 84 million. It varies from one cryptocurrency to another.
Cryptography is used to secure transactions and create new coins which are given as a reward to people who solve complex math problems. Simply put, people invest processing power to receive coins. And just like in gold, mining gets harder and harder as time passes. Bitcoin software technology enables a group of computers to maintain a collective book-keeping via the internet. It is neither in control of one party nor closed. But instead, it is made public and is available in a single digital ledger which is fully distributed across the network which is known as a Block Chain. All transactions like information on date, time, participants and amount on every single transaction in Bitcoins are locked.
Sometimes, Cryptocurrencies are just regarded as only virtual money or a transaction system. But if we see in detail, we see that the pecuniary aspect is just the tip of the iceberg. It is because Block Chain is a ground breaking internet technology for which, money is merely one of the possible applications. Cryptocurrencies have caused a paradigm shift. It’s time to explore this trending technology constructively and openly discuss potential applications.