The term ‘cryptocurrency’ has already created a lot of buzz in the world of technology and FinTech. It is, in fact, has been a dominating subject of discussion due to its contradictory nature. While a big lot of people consider it progressive, the other lot expresses concern about its authenticity. Whatever it is, the actuality is, cryptocurrency is in trend as well as in use. The better choice is to know its various sides as you never know when you may need to have an interaction with this virtual currency.
First the definition
Cryptocurrency is an internet-based digital currency acts as the medium of exchange in financial transactions.
Now the Facts
- Origin of cryptocurrency – This aspect always faces controversies. However, according to the known facts, the first cryptocurrency was created by pseudonymous developer Satoshi Nakamoto in 2009.
- It uses strong cryptography to ensure safety and transparency. By using blockchain technology, it ensures the decentralisation and also prevents the creation of additional units.
- The prime feature of cryptocurrency is – it has no centralised control and decentralisation is achieved through blockchain. It is free from any government control, which sometimes creates stress about its legal existence.
- The digital currency transactions can take place between the parties with a nominal processing fee via public and private keys. The fee structure is a pleasant contradiction to its counterpart practiced by traditional financial institutions.
CRYPTOCURRENCY AND BLOCKCHAIN – How Do Both Work Together To Complete A Transaction?
The process is not complicated but as the concept is new to many, a glance at the procedure is good to have.
Someone requests a transaction
It is broadcasted to the P2P network of computers called as nodes
The network validates the transaction also the user’s status via algorithms
The requested transaction is combined with the others for the purpose to create one new block of data
The new block adds to the existing blockchain
The transaction completes
This is basically about the process through which the transactions are first verified and then added to the blockchain ledger. This accepts the transactions from various forms of cryptocurrency. The other names for cryctocyurrency mining are – altcoin mining, cryptocoin mining, Bitcoin mining.
The purpose –
The cause behind the mining is to prevent anyone party from dominating the whole network. For instance – if someone creates many peers and then spreads fake transactions, it can be a potential threat for the rest of the network. The system would break immediately.
How mining happens?
The things work according to the rule. To qualify for mining, the miners first need to invest some work. They need to find a product with a cryptographic function, it should be able to connect the new block with the predecessor. Different cryptocurrencies have a different algorithm in this concern. In other words, the miners need to solve a cryptologic puzzle, the other miners to are in the competition. Those who solve the puzzle can do mining.
Versatility is another word to use for the digital currency. However, few of its properties should remain in your good knowledge.
- Irreversible – Whatever happens on the platform in the name of financial transaction, cannot be changed or altered. No one in the world can do this. Once a transaction is done, it cannot be reversed. This creates serious concerns on the safety part, as you have no prevention against scammers or hackers. Neither your own bank nor government can change whatever happened in the transaction. Even if someone stole the money right from your computer, nothing can be done.
- Global and fast – From validation to confirmation, the transactions happen in a few minutes. And the platform is global, doesn’t matter if you are sending money to your next-door neighbor or someone on the other end of the world. It is like one big virtual global village of money.
- Pseudonymous – Transactions, as well as accounts, are never connected to real-world identities. The addresses are nothing but just random chains of 30 characters. The names too are not those of real-world identities of their users. However, you can find the transaction flow but can never find out the actual identity and address of the users. This is why it has become a safe platform for people with a bad financial history who normally find solutions in things like very bad credit loans. Here, they have no fear of rejection as no precise rules are followed.
- No permission required – Cryptocurrency is just a software, which anyone can download for free and can start using. You do not need to cross any gatekeeper, once installed, send and receive currency without any obstruction. Across the world, you can do transactions.
No doubt, cryptocurrency is going to stay longer and will show many new versions. However, concerns too are sure to get intense on the safety matters. If you deal in it, the information above can be useful to play safe.