Cryptocurrency is a financial technology that uses cryptography for security and to create a decentralized system, which allows for the exchange of money without the need for an intermediary such as a bank.
This technology is fully digital and relies on the internet to function. The cryptocurrency was designed for existing outside of traditional banking institutions and other central authorities.
The use of cryptocurrency has increased in popularity over recent years, with bitcoin currently dominating 88% of the market share .” I will describe cryptocurrency and how it works in this article.
This article will also discuss critical cryptocurrencies such as Bitcoin, Ethereum, Ripple, and Monero.
Table of Contents
what is cryptocurrency ?
A digital payment system known as cryptocurrency doesn’t rely on banks to authenticate transactions. A peer-to-peer system enables anyone anywhere to send and receive payments.
A public ledger keeps track of all transactions involving cryptocurrency funds. In digital wallets, cryptocurrency is kept. Because transactions are verified using encryption, cryptocurrency has earned its name.
Advanced coding is required to store and send cryptocurrency data between wallets and public ledgers. Security and safety are the two main objectives of encryption.
how does cryptocurrency works ?
Governments and other central regulatory bodies do not have control over cryptocurrencies. Cryptocurrency, as a concept, operates outside of the banking system using various brands or types of coins, with Bitcoin serving as the leading player.
1. Mining
“Mining” is the process used to create a cryptocurrency, which is entirely digital. It’s a complex process. To be compensated with bitcoins, miners must solve specific mathematical puzzles over specialized computer systems. One bitcoin would be mined in a perfect world in just ten minutes, but it takes about thirty days in the real world.
2. Blockchain Technology
3. Buying, selling, and storing
4. Transacting or investing
With just a smartphone and a digital wallet, it is simple to transfer cryptocurrencies like Bitcoin from one to the other. Your options after purchasing them are to:
● Spend them on products or services
● sell them.
● Sell them for cash
The simplest way to make purchases with Bitcoin is through debit-card-style transactions. These debit cards allow you to make cash withdrawals like at an ATM. It is possible to convert cryptocurrencies to cash using banking accounts or peer-to-peer transactions.
Types Of Cryptocurrency
Tens of thousands of cryptocurrencies are accessible today, and 10,000 are expected to exist by 2022. The following are significant cryptocurrencies:
● Bitcoin
The first cryptocurrency that has gained widespread acceptance is called Bitcoin. Because of how well-known it is, the term “Bitcoin” was once used to refer to all cryptocurrencies. But prospective investors should be aware that bitcoins have skyrocketed in price.
One Bitcoin was worth $68,000 in 2021. The good news is that you can purchase smaller fractions of a coin instead of always buying the entire coin.
● Ethereum
Ethereum is the second most popular cryptocurrency after Bitcoin. Ethereum was introduced in 2015, but it differs from Bitcoin because it offers a broader range of applications and uses than Bitcoin. Ethereum can be described as a blockchain platform for crypto apps.
● Ripple
In 2012, Ripple Labs started developing an internet protocol designed to allow people to send money instantly. It’s based on a currency called XRP. According to a report by CNBC, Ripple is fundamentally different from other cryptocurrencies because it doesn’t require mining. Ripple’s XRP coins should be considered an enterprise’s shares instead of independent assets.
● Altcoin
Any alternative digital currency to bitcoin is referred to as an altcoin. Ethereum, one of the cryptocurrencies with the fastest market growth, is the most well-known in this ecosystem. Other alternative coins available today include Luckyblock, Shiba Inu, and Terra.
● Monero
Whenever a currency gains widespread use and experience, the competition level rises. In 2016, Monero, an alternative digital currency to bitcoin, became one of the world’s most popular and valuable cryptocurrencies. Using secure methods for transactions is Monero’s most significant advantage since it allows for greater anonymity than Bitcoin.
cryptocurrency in India
The future of cryptocurrencies in India was largely uncertain until the announcement of the 2022 Union Budget. The Indian Finance Minister’s announcement in the Budget that gains on the transfer of virtual digital assets, including cryptocurrencies, would be subject to a 30 percent tax was initially interpreted as support for cryptocurrencies.
It sparked discussion about whether or not the tax on cryptocurrencies shows that the government has accepted them as valid forms of payment. This, however, is untrue, and there have also been rumors that a ban on personal cryptocurrencies would come after the introduction of the RBI’s own official digital currency.
When T. Rabi Sankar, the RBI’s deputy governor, said India should have banned cryptocurrencies in February 2022, he was directly alluding to this.
Conclusion
Cryptocurrencies may or may not be the way of the future, but one thing is sure: It is not advisable for anyone to invest in them without doing enough research. The practice of investing in cryptocurrencies is not new.
But more people are seeking cryptocurrency advice due to the recent rise in popularity and value, as well as the declining returns on bank deposits. If you have chosen to invest in cryptocurrencies, start with the most popular ones like bitcoin because newer ones might not have enough liquidity (you may not be able to sell them when you want to).
Scammers abound in the market. Therefore, buying or trading cryptocurrency through authorized platforms is crucial, especially when just starting.