To understand cryptocurrency we need to dive into global economic history. After World War II, America was considered to be the most powerful country and all other countries had to attach their currencies to the US Dollar which in turn was attached to gold. Since it was not feasible to roam around carrying gold in our pockets, paper currency was introduced. This paper currency was exchanged on the basis of trust. For example, the Indian currency has these words inscribed on it. “I promise to pay the bearer the sum of <Amount> “ attested by the Governor. So the financial and payment institutions were given the freedom to print this paper currency and remain the central point of transactions between peers. Hence these institutions have control over your money. Furthermore, they provide loans to companies and other individuals with your money. To keep you happy, they provide a minor rate of interest over your amount. What is the flaw in this system? While providing loans to other parties if the finance and payment firms don’t manage the money properly, things can go south. Banks get into debts and the common man’s money is lost. For eg. YES bank failed miserably because they provided loans without making proper checks on the asking party. They were not able to repay the borrowed money and as a result, the bank made a career-ending loss.
What is the solution?
A more secure, decentralized way of managing money can solve this problem. A system where a person is the owner and manager of his own wealth. No one has to keep an eye on his transactions and in turn, no favors will be asked in return for storing the money.
Cryptocurrency is a software technology-based finance system. It uses blockchain-a distributed ledger enforced by different networks of computers. A hierarchical approach, where the higher entity i.e. government has control over the lower one i.e common man is not followed in cryptocurrency. It follows a linear approach instead.
It is possible because cryptocurrency is distributed over a large network of computers. This decentralized structure allows them to exist outside the control of governments and central authorities.
Cryptocurrency is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.
This aims to eliminate different currencies of the world such as the Dollar, Rupee, etc and introduces new currency. Some of the popular cryptocurrencies are Bitcoin, Etherium, Ripple (did I miss something?).
Using the traditional currencies, if you want to transfer some money to your friend you have to let the banks (both yours and your friend’s) know about the transaction. With the introduction of cryptocurrency services, you will be able to transfer the cryptocurrency without any interference.
Some of the worlds best cryptocurrency development service providers are
Binance
Uphold
Coinbase
How does cryptocurrency work?
Miners help in cryptocurrency transactions. Understanding how cryptocurrencies work underneath is a daunting task. If you wanna give it a shot, you can read about it here.
How to use Bitcoin?
There are two ways to use Bitcoin (or any cryptocurrency). You can either use it as an investment or as an alternate currency.
Investment:
Bitcoin has its value attached to the global economic markets and has become the most demanding asset in recent times. As of 21st May 2021, one Bitcoin equals 40,123.80 United States Dollar. You can buy Bitcoins and store them until their value increases to your desired amount and gain a profit. It is similar to investing in gold with one difference. You don’t get a tangible product that can be touched.
Alternate currency:
You can pay equivalent cryptocurrency to buy items. For eg: For a LED Smart TV worth $500 you have to pay 0.01246143186 Bitcoins as of 21st May 2021. Crypto is making a gradual impact as many well-known e-commerce sites have started accepting crypto payments. For eg: Shopify. Many traveling and hotel apps have also inclined towards these payments.
Why Bitcoin?
Cryptocurrencies use blockchain technology, it’s a decentralized processing and recording system and can be more secure than traditional payment systems
The market cap of digital currencies is ludicrously high as they are the wealth-creating assets of tomorrow and aims to wipe out corporate cash completely.The total value of all cryptocurrencies on April 13, 2021, was more than $2.2 trillion, according to CoinMarketCap. As of 21st May 2020, the market cap of Bitcoin is $759,264,253,825.
(You can check the current price to buy Bitcoin here)
They are the potential future of payments. Also competing with the giants like Oil and Gold, Crypto has made its own space in the financial asset world.
Prices of digital currency change at a rapid pace as compared to gold. Investors can gain unimaginable profits if they are willing to take the risks. What are the drawbacks of Cryptocurrency? People are a bit hesitant in putting their trust in something that has not yet globally accepted by everyone because of many reasons. By 2020 there are more than 2000 cryptocurrencies available in the market. It is difficult to validate cryptocurrency- other than the famous ones as reliable. Due to such high competition, digital currency remains to be volatile. Hacks are one of the mains concerns of people. As it is a software technology-based solution if the data of the users is compromised, multiple transactions can lead to huge loss. Moreover, the cryptocurrency lost won’t be traced as that is its main feature- anonymity Cryptocurrency trade can help terrorists carry out weapon exchange and escape easily. Anyone can create their own cryptocurrency, hence there are chances of fraudulent behavior. There are certain governments that have still not completely allowed using digital currencies. Eg: China. Such was the case with the Indian government but, in March 2020 the Supreme court of India has lifted the ban imposed by the RBI on crypto trading, investment, and exchanges stating it as illegal. Conclusion If you accept the risk that exists, you will be astonished to witness the gains. But it involves a lot of work to understand the cryptocurrency prices and trends.
Tesla, a well-known automobile company is investing heavily in Bitcoin by accepting payments in bitcoins.
If a visionary likeElon Musk has put his faith into Bitcoin then maybe there is something really solid about cryptocurrency.
As a wise man once said, "Change is the only constant". Cryptocurrency might be the change that we have been looking for to make the financial world better and more reliable.
