By Huma Arshad
cryptocurrency is a virtual or digital currency in the form of coins or tokens. Cryptocurrency is comprised of two words –‘crypto’ means data encryption and ‘currency’ means a medium of exchange. This digital form of currency is a medium of exchange used in the digital world, uses encryption that ensures the security of transactions. Cryptocurrency’s transactions are different than the traditional banking system. In traditional banking, money is regulated by regulatory agencies like state banks and other banks owned by the government. While in the case of cryptocurrencies, no state can control them.
Cryptocurrency is on the brink to launch a revolution, one that could reinvent traditional financial and social structure while bringing the world’s billions of unbanked individuals into a new global economy. ( The age of cryptocurrency;2015 by Paul Vigna and Michael, )
Use of blockchain technology in crypto transactions
Cryptocurrency works by using blockchain technology. Due to using blockchain technology, the transaction data is on all computers not only on a single server but on all computers connected to one network. Blockchain technology is a decentralized technology that spreads across different computers and that manages and records transactions. Through blockchain technology whenever a new transaction appears, it is replicated on all computers, which ensures that it can not be changed without the approval of all network partakers. Blockchain technology is widely used in keeping records and is prominently used in research, education, management, and medicines. There is a false misconception that blockchain is not open to the general public. The truth is many companies create their private blockchain to be used among their employees, while the majority of the blockchain behind famous cryptocurrencies like Bitcoin is approachable and accessible by the public.
Different types of cryptocurrencies
The encrypted coins and tokens come under cryptocurrency. Nowadays there are different cryptocurrencies other than Bitcoin but those have very little value and very little potential in the market. The most popular in the list are Bitcoin, Ethereum, XRP, Cardano, Stellar, USD Coin, Chainlink, Uniswap, Polkadot, Bitcoin Cash, etc. If we talk about Binance we came to know that it is a cryptocurrency exchange that gives a medium or platform for the trading purpose of different cryptocurrencies.
Among all of the Bitcoin is the most valued one. It was created to be used as a digital payment method. Successful currencies have six attributes including scarcity, divisibility, utility, transportability, durability, and counterfeit ability. When it comes to Bitcoin, it holds all these characteristics. After Bitcoin, the most famous is Ethereum, which is the cryptocurrency of the Ethereum network, which is an open-source blockchain on which developers can build dapps ( Dapps are a growing movement of applications that use Ethereum to disrupt business models or invent new models.)
Benefits of cryptocurrency
“Bitcoin is exciting me because it shows how cheap transaction can be.”- Bill Gates. Dealing in cryptocurrency is one to one affair based on peer to peer networking structure which does not require a middle man. This leads to less confusion over who should pay what to whom, and greater accountability, in that both the parties know each other directly. One of the main advantages of cryptocurrency is, this type of transaction guards the privacy of your financial history and safe you from the identity theft that is greater in the conventional system where your details can be revealed at any point in the transaction chain.
We all know that in traditional banking system transaction fee takes a chuck of our assets. In crypto transactions, you do not have to face any problem like that. There may be some external fee involved if you engage the services of third-party management services to maintain your cryptocurrency wallet. Unlike a normal wallet, crypto wallets technically do not store your cryptocurrency. Your holding is live on the blockchain but you can access it by using the private key. This private key proves your ownership of your digital money and allows you to make your transactions.
Although still not recognized as legal tender by different governments, cryptocurrencies due to their digital and virtual nature are not subject to the exchange rates, interest rates, transaction charges, or other embargoes imposed by any specific country. So it is an easier medium of international trade from one country to another country. We should not forget that still there are millions of people who have no access or limited access to payment systems like banks. Cryptocurrency is here to facilitate maximum people by spreading digital commerce in the world so that people with only their mobile phones in their hands can do the payment as it is a fact that more people have access to mobile phones than banks.
Beware of Crypto risks
The risks involved in dealing with cryptocurrency are diverse but limited to those only who participate in this business. Like any new step you take in life, there is always a risk involved. Cryptocurrency also has its pros and cons. So, like any other business before dealing in crypto either investing in it or simply holding it, you must gauge and understand the risk. The major risk involved in cryptocurrency is its volatility, instability, or unpredictability. For example, in 2017, the price of Bitcoin skyrocketed above 1,000% and then came crashing down. Afterward, the cryptocurrency hype has calm down, the price fluctuation has become more predictable. The risks in crypto dealing can be categorized into four major areas: technical risk to the one who is participating, the economic risk to the person who is involved in the transaction, systematic risks to the cryptocurrency ecosystem, and societal risks of acceptance and societal trend. For example, many financial experts are worried that Bitcoin is a bubble that could pop. If the high-value cryptocurrencies did crash, it would have devastating and long-term effects on all other cryptocurrencies which are of low value. Regulatory intervention is another obstacle as some governments have embraced digital currencies, while others are still rigid and have pushed regulations. Apart from all these risk factors in the end we have to remember this quote by Marko Halilovic,” Take the risk or lose the chance “