Digitalization has taken the whole world by storm as everything is becoming digitally controlled and operated. In the financial world, the transactions are completely shifting to online mediums like mobile wallets, USSD, internet banking, UPI and online payment applications.
Cryptocurrency is another encryption-based digital asset or currency that is gaining high popularity these days. These digital assets are secured using cryptography techniques to make the transactions safer and authenticate every transfer of assets.
In theory, Cryptocurrencies are protected from governmental interference as these are not issued by a central authority. Thus, these digital assets are completely decentralized, blockchain-based and organic.
The Origin of Cryptocurrency
The cryptocurrency was initially introduced as a peer-to-peer digital cash system. Satoshi Nakamoto (alias name) is the inventor of Cryptocurrency, who introduced Bitcoin as the first one. The whole purpose behind the invention of Bitcoin was to create a completely decentralized digital cash system.
A decentralized system is the one that works without any mediator i.e. without any bank. Thus, a decentralized peer-to-peer digital cash system helps in preventing double-spending. Double spending refers to the usage of the same amount in different transactions.
The idea of introducing a decentralized system was adopted after the failure of many centralized digital cash systems. Nakamoto believed that a peer-to-peer digital system for cashless transactions was the future. As a result of this, the first Cryptocurrency ‘Bitcoin’ was introduced. Bitcoin was launched on January 3rd, 2009. It is still the most prominent and highest valued digital currency in the world. Presently, there are thousands of Cryptocurrencies available online with different values and features.
How Does Cryptocurrency Work?
Cryptocurrency works just like bank debit cards, but the currency is issued by algorithms rather than government or banks. Thus, it involves peer-to-peer transactions that are completed using applications known as the Cryptocurrency wallets. All these transactions are recorded on an online public ledger known as the blockchain through the mining process.
To complete a transfer from one account to another, a public and a private key of the account is required. All the transactions are secured via cryptographic encryptions and that’s why the name ‘Cryptocurrency’ has been adopted.
The processing fees required to transfer funds through these digital currencies is very nominal as compared to other traditional money transfer mediums. There are many Cryptocurrencies that you can sell to other peers and get the corresponding amount of money transferred directly to your bank account.
How Does The Blockchain Work?
The working of a blockchain is similar to that of a bank ledger. Thus, a blockchain is a decentralized digital ledger that keeps a record of all the transaction and account statements. All these records are known as blocks, which are connected using cryptographic techniques. Every block consists of a timestamp, details of the transaction and preceding block’s cryptographic hash codes.
On completion of a transaction, the information of that transaction is forwarded to every user host with the blockchain copy. All the transactions are secured using one-directional hash codes. Each of these hash code is linked to the information of the previous block. These hash codes help in preventing any kinds of modifications in the blockchain.
Who Are The Miners?
Miners are the users who use software to decode cryptographic hash puzzles. This includes verification of the transactions and then, updating the ledger with that transactions ‘block’. The first miner to solve the puzzle is rewarded with some newly-mined Cryptocurrency coins. Along with this, they also earn transaction fees from the users who transacted. To solve puzzles quickly, miners even work as a team by using many computers to speed up the mining process. This is a consensus-based algorithm i.e. if the solution provided by all users match, then the transaction is verified.
How Is Cryptography Used In Cryptocurrency?
The transactions in a blockchain are completely secured through a one-directional cryptographic technique known as the public key cryptography. This technique is used to securely allow hash codes in connecting various blocks in the blockchain. Along with this, tokenization is used to send & save transaction data in the blockchain. Tokenization is also a one-directional cryptographic technique used to send the reference of transaction data rather than the original data. Therefore, the three main cryptographic techniques used to secure Cryptocurrency transactions include hash codes, tokens, and public keys.
How To Buy & Sell Cryptocurrencies?
You can easily perform research over the internet to find various Cryptocurrencies along with their value and performance graph. After that, you can start trading it through brokers and online exchanges. Peer-to-peer trading (with or without mediator) is also an available option for you. You can trade many Cryptocurrencies for goods, services, cash, and other Cryptocurrencies.
Cryptocurrency values are highly volatile, which is why you need to tread carefully while trading. Moreover, you should also be mentally prepared about suffering a huge loss while investing (especially in low-market capital coins).
Top Five Cryptocurrencies In 2019
Introduced as the foremost Cryptocurrency, Bitcoin is still the highest valued and most popular Cryptocurrency today. Bitcoin has a market capitalization of more than $181 Billion and per coin price is approximately $10,149.
Ethereum was introduced on 30th July 2015. It is the second most popular Cryptocurrency in the world. The total market capitalization of more than $20 Billion and the per-unit price is around $187.
Launched in 2013, XRP is currently the 3rd largest Cryptocurrency. XRP is known to have a market cap of around $11.5 Billion and the per-unit price is around $0.26.
Bitcoin cash was introduced in 2017 and is abbreviated as BCH. It has a total market cap of $5.5 Billion and the price of a single coin is around $307.
Litecoin was launched in October 2011. With a total market cap of approximately $4.5 Billion, it is currently the 5th largest Cryptocurrency in the world. The price of one LTC is around $72.
So this was everything you need to know about Cryptocurrency. If you’re thinking of investing, make sure to perform thorough market research before making the final decision.