Cryptocurrency Basics: Understanding Cryptocurrency
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What is cryptocurrency?
A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to make a copy of cryptocurrency or counterfeit. Many cryptocurrencies are controlled by many authorities with the help of different networks based on blockchain technology which simply means, a distributed form of ledger which is controlled through different computers with different networks. The main feature of cryptocurrencies is that they are not issued by any central authorities and there is no interference from the government.
Cryptocurrencies are secure payments that allow the investor to buy "virtual tokens", which are referred to by ledger entries in the main system. Crypto refers to the various algorithms and cryptography techniques that safeguard these entries such as elliptical curves and public key pairs.
Types of Cryptocurrencies
The first blockchain-based cryptocurrency was BITCOIN, which remains the most popular and most valuable one. Today there are thousands of Cryptocurrencies that have different functions and specifications. Some of these are similar to Bitcoin, and some new currencies have started their journey from scratch.
Bitcoin was launched in 2009 and was formed by an individual or group known by their fictitious name "Satoshi Nakamoto". As of March 2021, over 18.6 million bitcoins were in circulation with a total market cap of around $927 billion.
As Bitcoin was such a successful currency it gives rise to some other currencies such as Litecoin, Peercoin, Name coin, Ethereum, and EOS. Today the aggregate value of cryptocurrency is around $1.5 trillion and the Bitcoin value in this share is more than 60%.
Advantages of Cryptocurrency
So, investing in cryptocurrency is very easy because the transaction is between two parties, there is no need for the third party included like banks and credit card firms. The payments and transfer of payments are secured by the use of private keys or public keys. So, there is no manipulation in the transfer of payment system.
In the modern cryptocurrency system, in which every individual has his own "wallet" known as an account and the private key is only given to the account holder or an owner. The transaction fee is minimal because no third party is included so, there is no charge of commission from banks or any other financial institutes.
So, the disadvantages of cryptocurrencies are that it is very easy to invest in cryptocurrency so, it's very likely for a host to do illegal activities like money laundering and tax evasion and for instance, it is good for doing any illegal business because it's very easy to invest your black money in cryptocurrencies.