In simplistic terms, Cryptocurrency is a digitized asset spread through multiple computers in a
shared network. The decentralized nature of this network shields them from any control from
government regulatory bodies.
The term “cryptocurrency in itself is derived from the encryption techniques used to secure the
network.
As per computer experts, any system that falls under the category of cryptocurrency must meet the
following requirements.:
- Absence of any centralized authority and is maintained through distributed networks
- The system maintains records of cryptocurrency units and who owns them
- The system decides whether new units can be created and in case it does, decided the origin and the ownership terms.
- Ownership of cryptocurrency units can be proved exclusively cryptographically.
- The system allows transactions to be performed in which ownership of the cryptographic units is changed.
The first type of crypto currency was Bitcoin, which to this day remains the most-used, valuable and popular. Along with Bitcoin, other alternative cryptocurrencies with varying degrees of functions and specifications have been created. Some are iterations of bitcoin while others have been created from the ground up Bitcoin was launched in 2009 by an individual or group known by the pseudonym “Satoshi Nakamoto. As of March 2021, there were over 18.6 million bitcoins in circulation with a total market cap of around $927 billion.
The competing cryptocurrencies that were created as a result of Bitcoin’s success are known as altcoins. Some of the well-known altcoins are as follows: - Ethereum
- DOT
- XRP
- ADA
- 1inch
Cryptocurrency has the following advantages
Funds transfer between two parties will be easy without the need of third party like credit/debit cards or banks
It is a cheaper alternative compared to other online transactions
Payments are safe and secured and offer an unprecedented level of anonymity
Cryptocurrencies have the following disadvantages.
The almost hidden nature of cryptocurrency transactions makes them easy to be the focus
of illegal activities such as money laundering, tax-evasion and possibly even terror-financing
Payments are not irreversible
Cryptocurrencies are not accepted everywhere and have limited value elsewhere
There is concern that cryptocurrencies like Bitcoin are not rooted in any material goods.
Some research, however, has identified that the cost of producing a Bitcoin, which requires
an increasingly large amount of energy, is directly related to its market price.
Modern cryptocurrency systems come with a user “wallet” or account address which is
accessible only by a public key and pirate key. The private key is only known to the owner of
the wallet
Fund transfers are completed with minimal processing fees.