The Basic Understanding of Cryptocurrency
Cryptocurrency has burst into the scenes in the last decade or so. Today, cryptocurrency is a phenomenon worldwide. Cryptocurrency is designed for the purpose of working as a medium of exchange. It uses cryptography for securing financial transactions. It is a digital currency which uses cryptography in its operations in a major way hence, the name cryptocurrency. As of 2018, many accounting firms, banks or other finance industries have researched cryptocurrencies while some have found application for it in their businesses.
Cryptocurrency emerged around 2008 – 09 approximately by pseudonymous inventor Satoshi Nakamoto. The invention of cryptocurrency was somewhat of a fluke as it was not the inventor’s intention; it was to accompany his main project of digital cash. Since its invention cryptocurrencies have seen highs and lows. Nakamoto found a way to decentralize the digital cash system and it is one of the many advantages of cryptocurrencies. This idea to decentralize the digital cash system led to the creation of cryptocurrencies as we know today.
What is Cryptocurrency?
Cryptocurrency is a digital asset which is a digital currency and it makes use of cryptography for security. According to Jan Lansky, there are conditions which cryptocurrency meets as a system on the whole. In cryptocurrency, the system is not required to have a central authority; its maintenance is done by distributed consensus. The design of the system is such that it keeps an overview of units and ownership of the cryptocurrency users. The creation of new units of cryptocurrencies is system defined. The circumstances of the origin and how to determine the ownership of units is in the system’s hand.
The process of cryptocurrencies is very different in comparison to what we know about transactions. Owning the units of cryptocurrencies can be proved only exclusively through cryptographic methods. The system also has functions to allow transactions where the ownership of cryptocurrency units is changed. A statement of transactions can be possibly issued to prove the current ownership of units. There are functions to keep the owners secured in cryptocurrency system, for example, if two instructions for the same unit are entered, the system automatically carries out just one of them. The system allows only one function at a time which reduces the margin for human error.
Cryptocurrency in current times
The most popular association with the word cryptocurrency is Bitcoin. When Bitcoin was released in 2009 it was an open source software. It is the first decentralized digital currency to be introduced. Over the years, Bitcoin has gained huge popularity and seen ups and downs in its short time period. Bitcoin is the most popular and valued digital currency and it is closely followed by Ethereum. Since the introduction of cryptocurrencies, a lot of uses for it have come up. The number of people all around the global investing in digital currency has increased rapidly over the last couple of years.
Cryptocurrencies are now being accepted by some business around the world as a method of payment. The popularity of cryptocurrencies has resulted in these changes, as it is accepted as a payment method and established crypto-ATM’s in 58 countries so far. Acceptance of cryptocurrency has opened a new group of customers for the business and made cryptocurrencies like Bitcoin more mainstream. With the increase in popularity Government agencies, law enforcement, tax authorities etc are trying to find ways in which cryptocurrencies fit in their systems and where it stands in reference to their operations.
The legality of cryptocurrencies is different in different countries throughout the world. There are some countries which have banned completely anything to do with cryptocurrencies while some countries have an ‘implicit ban’ on cryptocurrencies. Banks and finance agencies are trying to incorporate cryptocurrencies in their systems but that is still a work in progress. Cryptocurrencies aren’t completely developed as of yet. There are still many changes and alterations that need to be made to remove the inconvenient aspects of the system.
Bitcoin is undoubtedly the most popular cryptocurrency and it has almost become synonymous with the word and meaning of cryptocurrency. There are however other types of cryptocurrencies available which are not as popular as Bitcoin but have a market. Namecoin, Litecoin, Peercoin, Ripple and Ethereum are a few of the other cryptocurrencies available today.
The market of cryptocurrencies is an uncertain and rapidly growing market. New cryptocurrencies are being developed, promising new possibilities and hoping to create a success similar to Bitcoin. The world of digital currencies is complicated and cryptocurrencies are in a way its first success. There is a lot of scope for improvement to this technology and different applications but first, there are quite a few issues that need to be addressed. Having said that cryptocurrencies continues to gain popularity and keeps improving. It has promise and potential if it is done right.
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