what is exactly cryptocurrency?
By Isha Shukla
In all our lifetime, we must have come across the word cryptocurrency. But what is exactly cryptocurrency? Cryptocurrency is a form of virtual currency which works as a medium of exchange. It is just like any other currency but digital. Like any other currency, it can also be exchanged in return of assets, goods or services. It is secured through cryptography which is nothing but a method to protect data and information through computer codes. Through cryptography, it is protected in such a manner that it cannot be counterfeited or spent twice. They work on a decentralized system i.e. a system not regulated by a government or any financial institution. The system of cryptocurrency is peer-to-peer network. It means that the exchange of cryptocurrency happens directly among people and no third party like a bank or payment apps like PayPal or Paytm is involved. The user is in full control of their money and information constantly. Cryptocurrency uses a technology called blockchain for managing and recording the transaction. Blockchain technology is a virtual ledger which records transactions across many computers so that no record can be altered without consequently altering another record or block. One change in a block will result in a subsequent change to some or all the other blocks thus it is called blockchain technology.
In 1980s many innovators and developers had the idea of a digital currency. The idea came into being as many people thought that they had no control over their money and that government or financial institutions have too much power over them. Many attempts at creating a viable cryptocurrency were made with systems like DigiCash, Cybercash and Flooz. But they all failed because they depended on incompetent third-party companies for the verification and facilitation of transaction.
In 2009, a successful cryptocurrency system, Bitcoin, was developed by an individual or group going by the name of Satoshi Nakamoto. This was the first decentralized peer-to-peer network which used blockchain technology to avoid discrepancies and solved all earlier problems like double-spending and counterfeiting.
On January 12, 2009, Satoshi Nakamoto made the first ever Bitcoin transaction by sending 10 BTC to a person named Hal Finney. By 2011, world’s first successful cryptocurrency came into being. By April 2011, one Bitcoin was worth one US Dollar ($) and by December 2017, one Bitcoin was worth more than $20,000. The current price of a single Bitcoin in 2020 is $7,576.24.
Legality of Cryptocurrency
With development of cryptocurrency many problems for the governments arose. A major issue is regarding the nature of cryptocurrency as it is decentralized and can be used by anyone anonymously. Due to this, it has a great appeal among the people for illegal trade of goods and services or for money laundering and tax evasion schemes. As of now following countries have declared cryptocurrency illegal-
Countries like Japan, Germany, France, Holland and many more have legalized cryptocurrency and showed a positive attitude towards cryptocurrency and made provisions for its regulations in their own country. While some countries like India, UK, Canada, Russia though legalizing cryptocurrency have a neutral outlook towards cryptocurrency. It means that people can purchase or sale cryptocurrency but there is no provision of its regulation from their governments.
Advantages of Cryptocurrency
The main advantages of cryptocurrency are that there is low transaction fee and transfer of funds is easy. A person just needs to have a computer and an internet connection to do the transfer or transaction and there is no reliance on any third party. Only the conversion cost is to be paid by the person which is very less. Cryptocurrency also cannot be counterfeited as they are always encrypted by cryptographic technology. Hence it cannot be duplicated or fabricated.
Disadvantages of Cryptocurrency
The main disadvantage of cryptocurrency is the anonymity of its holder. It can be used in the sale of illegal goods and other illegal activities like tax evasion and money laundering. It is one of the main reasons why it is outlawed in many countries. It is highly volatile which means that its value keeps on changing rapidly and unexpectedly. There is also no remedy to hacking which causes a lot of security threats which makes cryptocurrency vulnerable and even more disadvantageous. There is also too much confusion among the public regarding cryptocurrency as there is no uniform law for its regulation.
There are pros and cons to everything that exists and same is the case with cryptocurrency. While complete adoption to it is very far from future but it has for sure paved a way for a new paradigm. People are still unknown and unaware to the world of Bitcoin and cryptocurrency but with their increase in growth and market cap it definitely has potential to change our lives for better.
12 thoughts on “what is exactly cryptocurrency?”
It’s interesting and very informative.But it’s disappointing to know that there is still no remedy to hacking
This blog was a great insight into what exactly is a cryptocurrency and what are the advantages and disadvantages of it. Very informative.
The real world needs a real currency and what a cyber world needs is an online currency that’s what it is called the cryptocurrency and it’s need in today’s world but what are the challenges and effects of that is detailed in this article
This was probably the most simplified article on cryptocurrency covering the basics. Really well written. Personally, I would like India to introduce it as well and then regulate it accordingly.
The most confusing topic was brought into simple words. Basic and informative.
Although in India now dealing with cryptocurrency is legalized it is just the act of adding a new problem altogether with the existing ones. There are instances of misuse of it worldwide . Various frauds have been done and also of huge numbers with cryptocurrency and also data mining another regime. The question of the hour Is our law enforcement capable of handling such issues and cases?
interesting and informative blog its a safe currency because in the block chain transaction if the chain gets broken i.e., the block chain then the whole code is disconnected and the data is fully safe at this stage of transaction also. so it is considered as a safe mode of transaction in which cryptocurrency. it is not yet legalized in every country but it is developing day by day and can be helpful in the time where cyber crimes are increasing and people are not trusting any app to do the transaction of money or transfer of data and the block chain system is safe and if it came in our country with more betterment it can be helpful. GOOD ARTICLE FOR ENHANCING KNOWLEDGE ABOUT NEW TOPIC WHICH CAN BE HELPFUL IN DECREASING CYBER CRIMES IN THE COUNTRY BECAUSE IT IS DIFFICULT TO HACK THE CODE EASILY.
I india it is also legal. Which adds one more responsibility to cyber cell.
Thanks, great article.
The article is generating a hope in the minds of the readers, that how cryptocurrency can be at larger level used to maintain the economy of the country if the solutions to the disadvantages can be achieved. Almost everyone might have used such method of money transfer, but were never well verged that this is called method of transaction through cryptocurrency.This mode of transaction can be very much useful in generationg Indian economy with much security especially when country is facing huge pandemic, any other emergency periods, there by with full security. if put into action…on larger scale…..
Cryptocurrency will be a major factor which could affect the us in both negative and positive ways. recently the supreme court of india made cryptocurrency as legal. This is a very useful article,.
A very informative article on the bitcoin which we all are lured towards because of its high popularity, high value. just a small note , these currencies are generally used by cyber criminals so stay away from them if you aren’t confident of yourself that you can handle it carefully. Moreover , till now the RBI hasn’t approved any entity to deal with virtual currency so Its all on you .