What are Cryptocurrencies and how do they work?
If you hear the word crypto currency or blockchain, it is possible that the word bitcoin comes to your mind and one might take them as the same thing but the case is just different
Cryptocurrency is a digital currency of this modern age using which you can sell and buy things, that is you can accept or transfer the payment as bitcoin.
Every digital currency uses a platform or follows some technology to perform its networking, thus cryptocurrency follows blockchain technology.
Blockchain technology is a totally decentralised technology in which a huge network helps in completing and verifying the transactions.
Why is decentralisation necessary?
The advantage of decentralisation is that it doesn’t involve any third party like a bank or any other regulatory authority. As it uses blockchain technology so once the transaction is made, it can’t be edited or undone. Or the amount transferred can not be changed and digits can’t be edited through any illegal interference like hacking. Which makes it quite safe. Once the transaction is made, the records are maintained and stored in the network and a block is made in the block chain with all its details including amount, time , user, receiver and date etc.
Digital Wallets and Private Key
Crypto currency is independent of any banks or other resources like government or other authorities so in order to store the money you need a digital wallet which is accessible through a private key.
The private key is sort of a certificate of the verification or confirmation of a specific person to be the owner of the currency. And there is no access without a key.
If you generate a private key to your currency, you can access your money from any part of the world.
Benefits of Cryptocurrency
- No involvement of third Party:
If you go to a bank to open an account, you have to pay certain fees,deal with alot of documentation and have certain amount already to fall into the criteria and you have to be answerable for the transactions made, like where did the money come from who is the receiver etc. but in cryptocurrency none of the resources can have objection over your transactions
- Transactions Are quick
Transactions are made in a matter of moments, despite location. You can make international payments in seconds unlike other sources of sending or receiving money.
- No identity thefts or transfer limits
- Authentic verification of transactions.
- No limits to the funds to be transferred.
Thus the accounts can’t be hacked and there is no central point of failure. As of 2018 there’s more than 1600 cryptocurrencies like Bitcoin, Litecoin, Ethereum, Z-Cash and considering their growth at the moment, there are plenty more to come in the future.
The emergence of this new system of transaction, it might have to face difficulties with the regularities for its anonymity and will have to satisfy a vast criteria.keeping in view all the risks , The failure or success of bitcoin might also determine the future of other cryptocurrencies in the coming years.