What Is Cryptocurrency: A Quick Outline in Less Than 10 Minutes

Bitcoin - the first, biggest and the most popular cryptocurrency - was the buzzword of 2017. The hype has not calmed down and is still continuing to the current time. The term cryptocurrency has grabbed so many eyeballs, and apparently, the Oxford Dictionaries Online (ODO) found it significant enough to add it to its database.

Why Should You Bother About Cryptocurrency?

Cryptocurrency has now managed to become a global phenomenon after being greeted with a tremendous amount of initial skepticism. Debates are going on about whether virtual currencies are dubious or mainstay alternatives to money because more and more users are saving up their capital as well as with the help of their Bitcoin wallet.

But in a scenario wherein there are over 1,000 cryptocurrencies, and a handful among them are making real waves, it is sensible to stay insightful about this phenomenon. About 626 of cryptocurrencies that are listed in coinmarketcap have market caps of at least $100,000 (with Bitcoin dominating with a market cap of $55 billion). There has been a huge increase in the number of people who are engaged in cryptocurrency trading.

Jamie Dimon, Chairman, CEO and President of JPMorgan Chase, the largest of the big four American banks, has recently revoked his reproach for cryptocurrencies. He expressed a very positive attitude on Blockchain, the technology that supports Bitcoin.

Managing Director of the International Monetary Fund (IMF) Christine Lagarde has expressed her progressive approach towards virtual currency at a Bank of England conference. While discussing the possible impact of virtual currencies, new models of financial intermediation, and artificial intelligence on central banking, she boldly stated that it was not wise to dismiss virtual currencies. She also conveyed her optimism that technological challenges of the cryptocurrency system will be resolved in due course as it matures further.

Recently the Arizona Senate passed a bill allowing residents in the state to pay their taxes with cryptocurrencies. If the bill is approved by Arizona’s House of Representatives, Arizona would become the first state in the U.S. to accept cryptocurrency tax payments by the year of 2020. This is indeed a positive signal for cryptocurrencies as it will boost their inherent utility and value.

Many people, including lots of financial experts, believe that cryptocurrencies are now in the nascent stage before becoming mainstream.

So, if you don’t want to be late to the party when other investors are getting ahead of you, it’s better to be well-informed.

What is Cryptocurrency?

Cryptocurrency is defined as a virtual or a digital asset that serves as a medium of exchange. Advanced encryption techniques known as cryptography make it very secure and safe. The robust security features make the system extremely resistant to any types of counterfeits.

The major active cryptocurrencies other than the first major usable cryptocurrency Bitcoin are Ethereum, Litecoin, Dash, IOTA, Monero, Zcash etc.

Cryptocurrency is organic in nature. It means that they are not issued by any central authority. The possibility of peer-to-peer transactions without a central clearinghouse adds an appealing allure to it. The exclusion of government interference or manipulation is made possible by the Blockchain technology, the underlying technology that powers cryptocurrencies.

The Blockchain is a resourceful invention by a person or group of people known by the assumed name Satoshi Nakamoto, who also designed Bitcoin in 2009. Actually, Bitcoin was the reason for inventing Blockchain.

A Quick Overview Of How Cryptocurrency Works?

Cryptocurrencies are created and stored in Blockchain, a distributed public ledger that is linked and secured using cryptography. This growing list of record is permanent and serves as an open record of all transactions on a network. They are held and updated by the cryptocurrency holders.

All exchanges and transactions are recorded in this decentralised ledger without any involvement of any third party intermediary.

Many people approach cryptocurrencies with fear and distrust due to the single reason that they are not issued by any central authority. But a deeper understanding of the phenomenon will help them realize that most of their fears are baseless.

People can create digital properties securely without depending on any centralized activity supervised by a nation’s central bank. Transfers are enabled through the use of public and private keys. Database changes can be effected only after fulfilling specific conditions.

A group of people known as miners are involved in the job of verifying cryptocurrency transactions and other ‘bookkeeping’ services. They solve challenging mathematical equations on a competitive basis and get some rewards.

As the database is stored across a network of computers, the accounts are always accessible. There isn’t any single central depository of data. This also means that the fear of hacking is pointless, as the hacker will have to hack every single computer!

The completely decentralized network enables people to have a revolutionary way of storing money. They can store money on the internet without any requirement to use their name or going through the tiresome bank formalities. It also saves people from paying wire transfer charges that are usually charged by banks and other financial institutions.

In simple terms, cryptocurrencies facilitate a new electronic cash system wherein, we can trust ourselves in managing our money rather than putting trust in middlemen (banks). The new system establishes the reality that money transfer doesn’t simply mean an entry in the bank register.

Conclusion

The senior US, Senator Thomas Carper remarked, “Virtual currencies, perhaps most notably Bitcoin, have captured the imagination of some, struck fear among others, and confused the heck out of the rest of us.”

A clear understanding of this global phenomenon will drive away fear and confusion in your minds. G7 countries have taken a friendly stance about cryptocurrency. Many global companies have started accepting payments in Bitcoin/other cryptocurrencies; for instance; Dell, Steam, Dish Network, Overstock, Microsoft, Save the Children, OkCupid, Wikimedia Foundation etc.

The financial and technology space is buzzing with the cryptocurrency craze. Lots of IT companies are also swinging into this digital currency movement by providing cryptocurrency trading platform software development services.

Unless you are living in a cave in a jungle, you cannot avoid noticing the waves created by this unhackable currency. There is no doubt that cryptocurrency will be media’s favourite topic in the coming years also.