What is Cryptocurrency? today we are going to discuss what is Cryptocurrency, its Benefits, What is Cryptography? & more…
History of Cryptocurrency
In the caveman era, people used a barter system, in which goods and services were exchanged between two or more people. For instance, one may exchange seven apples for seven oranges. The barter system fell out of popular use because it had some obvious drawbacks:
People’s needs must coincide – if you have something to trade, someone else wants it, and you want what the other person is offering.
There is no general measure of value—you have to decide how many of your things you are willing to trade for other things, and not all things can be divided. For example, you cannot divide a living thing into smaller units.
Unlike our modern currency, which fits in a wallet or is stored in a mobile phone, goods cannot be easily carried.
As people realized that the exchange system was not working well, the currency went through a few iterations: in 110 BC, the official currency was minted; A.D. In 1250, gold-plated florins were introduced and used throughout Europe; And from 1600 to 1900, paper currency gained widespread popularity and began to be used around the world. This is how we know modern currency came into being.
Modern currencies include paper currency, coins, credit cards and digital wallets – for example, Apple Pay, Amazon Pay, Paytm, PayPal, etc. They are all regulated by banks and governments, meaning there is a central regulatory authority that limits how paper currency and credit cards work.
What is Cryptocurrency?
A cryptocurrency is a coded string of data representing a currency unit. Peer-to-peer networks known as blockchains monitor and organize cryptocurrency transactions, such as purchases, sales, and transfers, and also serve as a secure ledger of transactions. Using encryption technology, cryptocurrencies can serve as both a currency and an accounting system.
Cryptocurrency is a digital or virtual currency that means a medium of exchange. It is similar to real-world currency, except that it has no physical embodiment, and uses cryptography to function.
Because cryptocurrencies work independently and decentralized, without a bank or central authority, new units can only be added after certain conditions are met. For example, with Bitcoin, a miner will be awarded Bitcoins only after adding a block to the blockchain, and this is the only way new Bitcoins can be generated. The limit for bitcoins is 21 million; After this, no more bitcoins will be produced.
Advantages of Cryptocurrencies
With cryptocurrency, transaction costs are not at all low – for example, the fee for transferring money from a digital wallet to a bank account. You can transact at any time of the day or night and there is no limit on purchases and withdrawals. And anyone is free to use cryptocurrency, unlike setting up a bank account, which requires documentation and other paperwork.
International cryptocurrency transactions are faster than wire transfers. A wire transfer takes half a day to move money from one place to another. With cryptocurrencies, transactions take only minutes or even seconds.
What is Cryptography?
Cryptography is a method of using encryption and decryption to secure communications in the presence of malicious third parties—that is, third parties who want to steal your data or eavesdrop on your communications. Cryptography uses computational algorithms such as SHA-256, which is the hashing algorithm that Bitcoin uses; public key, which is like a user’s digital identity shared with everyone; and the private key, which is the user’s digital signature that is hidden.
Traditional currencies vs. Cryptocurrencies
Imagine a situation in which you want to pay a friend who bought lunch for you by sending money online to his account. There are several ways in which this can go wrong, including:
- A financial institution may have a technical problem, such as its systems being down or machines not working properly
- Your or a friend’s account may have been hacked—for example, through a denial-of-service attack or identity theft.
- Your or your friend’s account may have exceeded the transfer limit.
There is one central point of failure: the bank.
This is why the future of currency lies with cryptocurrencies. Now imagine the same transaction between two people using a Cryptocurrency wallet. A notification appears asking if the person is sure they are ready to transfer bitcoins. If yes, processing takes place: the system authenticates the user’s identity, checks whether the user has the required balance to perform the transaction, etc. After that is done, the payment is transferred and the money arrives in the recipient’s account. All this happens in a few minutes.
Cryptocurrencies, then, eliminate all the problems of modern banking: there’s no limit to the amount of funds you can transfer, your accounts can’t be hacked, and there’s no central point of failure. As mentioned above, there are more than 1,600 cryptocurrencies available as of 2018; Some popular ones are Bitcoin, Litecoin, Ethereum and Zcash
