The basics of cryptocurrency: What you should know

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cryptocurrency

The cryptocurrency refers to digital money or virtual currency. It is designed to work as medium for exchange and trading. The network works on the principle of cryptography in order to provide security and verify the transactions that take place. Moreover, it also plays a role in creation of new units that are a part of a particular cryptocurrency. If you keep it simple, you can take the cryptocurrencies as limited entries that are present in a database which can’t be changed unless there are certain conditions that are being fulfilled.

History of cryptocurrency

The attempts of creating a digital currency have been around since 1990s and systems like Flooz, Beenz, and digicash came in the market. However, all of them failed and no one was able to stick around for long due to various reasons. These include fraud, financial problems, and issues with companies creating the coin concerning the employees and owners.

One of the biggest reason behind it was the fact that all of them used a third party verification system i.e. the company that was behind its making facilitated the transactions. As these businesses fell, the currencies went crashing along.

In 2009, there was a programmer or a group of individuals working under the name of Satoshi Nakamoto. They introduced bitcoin and it was described as a peer to peer electronic cash system. The fact that it was completely decentralized meant that it was not controlled by anyone and its concept was pretty much similar to the one that we experience with peer to peer file sharing.

The problem here was avoiding a person from spending same balance twice and for that there was always a company or authority overlooking it. Therefore, it was ultimately centralized and the authorities were in control of your balance and details. However, with bitcoin, it went into blockchain which was a public ledger and it is where the record of all transactions are kept. It is available to everyone who is a part of this network hence anyone can check the account or transactions.

The transaction records here are stored in a very interesting way. There is a public wallet id of sender and receiver along with the amount of bitcoin transferred that are registered into the ledger i.e. blockchain.

The role of miner is most interesting in the cryptocurrency game. They are the individuals that solve cryptographic puzzles (essentially with the help of computer programming) to verify the transaction. They mark it as legitimate and it is sent throughout the network. Once added to all the relevant nodes, the transaction is marked as confirmed and no one can forge it neither it can be reversed. As for the miner who helps in its verification, there is a specific reward and a transaction fee.

What can be done with cryptocurrencies?

In modern era, the cryptocurrencies are getting pretty popular. Individuals are using them for a number of different purposes. More and more currencies are surfacing on the network and websites like YourCryptoWizard.com assures that you get detailed information about every single digital money.

One can use it for purchasing goods. There are stores that allow you to get goods and in return you get to pay in bitcoins. Even colleges and universities along with some big companies with strong authorities backing them have started receiving bills in cryptocurrencies and you can pay them accordingly. Such merchants can be found both online as well as offline that are ready to trade with digital currencies.

Moreover, one of the most common things people do with such currencies is the investment. As stated, more and more currencies are surfacing up the market and it is increasing the investment opportunities for people that look forward to make some money for themselves. While it is a high-risk investment, it can bring some seriously good returns. For instance, the bitcoin, which is most well known digital currency all over the globe, was around $800 in 2016 while by November 2017 it went up as much as $7000. The currency price went as much as over $20,000 but has dropped down once again. So, as you invest in them, you better keep it in mind that their market value fluctuates to a great extent and they are pretty volatile.

Lastly, mining is done and the miners are seen as one of the most important individuals in the world of digital currency. Many people think of it as doing a bit of programming and you start receiving money. However, it is much like investment that you do in trading. You need to set up appropriate environment i.e. devices and programs and work with them to solve the complicated cryptographic puzzles. These help in verifying the transactions that are done and register them on all the nodes of blockchain. In return, they get transaction fee and reward for spending time and resource.

Legal issues

As stated, digital currency is decentralized and there are three primary receptions that it receives. First you have the individuals that don’t give it any response. Then you have the people who encourage it as they find centralized money as ‘being watched over’ in daily life. And lastly, there are people who criticize it and state that it will promote the illegal activities across the globe as the people dealing in such kind of currency cannot be tracked which makes the transactions completely anonymous.

As of today, 18 July 2018, according to Wikipedia, there are certain countries that have declared the use of cryptocurrencies as illegal activity. These include Algeria, Canada (legal but banking is ban so partially illegal), Bolivia, Ecuador, Jordan (legal but banking is ban), Iran (ban on banking else legal), Bangladesh, India (legal with banking ban), Nepal, Cambodia, Indonesia (legal for trading illegal for payment), Thailand (legal while banking is ban), and Vietnam (trading is legal but cannot accept it or send it as payment).

Other countries either haven’t issued any statement about the cryptocurrencies or have legalized it. In some parts of the world, it is being used vitally with ATMs and machines allowing you to obtain physical cash for your digital money.

Common cryptocurrencies

Here are some common cryptocurrencies that you should consider taking a look at:

  • Bitcoin: When we talk about the cryptocurrencies, the first name that comes to our mind is bitcoin. It was launched in 2009 and is perhaps the most valuable cryptocurrency over the globe. If you are interested in investing in it, we suggest you to check out the bitcoin price prediction 2020 to see its potential.
  • Litecoin: which was referred as to the ‘silver to bitcoin’s gold’ and came into the market back in 2011. The currency has market cap of $4.89 billion.
  • Ethereum: Another fast growing digital currency is ethereum. It was launched in 2015 and has the market cap of $47.47 billion.
  • Zcash: Zcash is another decentralized cryptocurrency that was launched in late 2016. It emerged on the scene and was quickly popular. Soon, it gained a good share in the market and account for $713.254 million.
  • Dash: Dash was formerly known as the darkcoin and offers you higher anonymity as it works on mastercode network. The transactions in this currency are nearly untraceable. Launched in 2014, the currency has a market share of $1.999 billion.

Other widely used cryptocurrencies with growing potential include Ripple and Monero.