The world becoming digital in every sphere of life , we see traditional processes and products being replaced with digital innovations every day. Financial instruments and services are also not far from this change. In past decade we have come across a new revolutionary concept of digital currency which defy every possible limitation of physical currency and striving hard to come mainstream. Governments and Monetary controlling agencies find it difficult to accept these cryptocurrency in it absolute form and finding a balanced approach place it on financial horizon.
Everything you need to know about Cryptocurrency
Through this article we would cover following point to have a better understanding of Concept of cryptocurrency and related various other factors
- What is Cryptopcurrency
- Why is it so popular ?
- How does Cryptocurrency work ?
- Type of cryptocurrency
- Cryptocurrency Trade Markets & Exchange
- Cryptocurrency legality in India
- List of most famous Cryptocurrencies
- What is Cryptocurrency/ Bitcoin mining
- Is it possible to mine cryptocurrency with your laptop or mobile
What is Cryptocurrency ?
Concept of currency is not as old as our trade. In past we used different medium to payment or compensate the monetary value of any service or product. We used to give a product or service in return instead of currency and we called this trade as barter trade. As civilization took place and we become more and more sophisticated we needed a universal product which is acceptable in every trade, precious metal were used for the same purpose.
In a Country the most common form of currency is paper bills issued by a central authority of that country. Normally the value of that currency depends upon the metal reserve or government security or both of that country.
Now we have come across a new form of digital (virtual) currency which is just in form of digital form we call this digital currency Cryptocurrency. This virtual currency is secured by cryptography which makes it impossible to counterfeited or forge. Cryptocurrency works on block chain technology , where every single transaction is noted and it can not be reversed.
Why is it so popular ?
Every financial transaction requires to pay some transaction fee and if this transaction is inter continental it has to pay many other taxes levied by both countries which make such transaction costlier for trade. Lot of people were trying since long to overcome such problems and introduce a digital form of currency. The First ever crypto currency make it to market was Bitcoin, launched in January 2009 by Satoshi Nakamoto.
The reason behind being so popular are as mentioned below
- No control by any government (decentralized currency)
- Transaction are free from any monitoring and taxation ( Currency in digital form) though small transaction fee is applicable
- Accessibility without disclosing identity(only need code)
- Free from inflation or devaluation
- Future of currency
- Higher return for early investors
How does Cryptocurrency work ?
A cryptocurrency has a record of every transaction in from of a ledger, where all transactions are made public so that total visibility is provided. Having a ledger forces everyone to “play fair” and takes away the risk of double spending.
The ledger is a list of transaction entries in a database that nobody can change. Nobody owns the ledger or the cryptocurrency block-chain, instead, it’s decentralized which means a self-run and self-governed system without the interference of outside parties. if one block goes missing the entire cryptocurrency database crash down and becomes value less so the encryption and validation process requires too much of encoded coding or hash which is nearly impossible to replicated.
lets understand this whole process with help of a simple diagram
When a customer request for transaction it establishes a peer to peer connection between any other nodes or entire network and this transaction is known almost immediately by the whole network. But only after a specific amount of time it gets confirmed by miners.
Transaction confirmation is the key concept of Cryptocurrency, as long as a transaction is unconfirmed or validated, can be forged so the process of validation must be fast, and here comes the role of a miner (a dedicated process validation software to solve to transactional puzzle ). Once the transaction is confirmed it is nonreversible and becomes the part of block chain of historical transactions.
Type of cryptocurrency
There are thousands of Cryptocurrency in the whole world but only few are in the market. Life of a cryptocurrency depends upon the strength of blockchain it has created for all the transaction, a small glitch destroy whole blockchain and make it untrustworthy for further usage.
Cryptocurrency Trade Markets & Exchange
Like any other currency digital currency also have multiple trading platform to buy and sales. Most of time cryptocurrency markets is linked with a particular currency. Such type of platform provides buy, sale and exchange facility of a fraction of fee.
Indian cryptocurrency market is not yet developed as compared for USA, Canada or Japan but slowly its catching up.
Major Cryptocurrency Markets
Cryptocurrency legality in India
Its been more than a decade since first Cryptocurrency was introduced in the market in the form of Bitcoin but in India it is still in the native phase and would require little time to come mainstream. Digitization has tremendously increased the speed of its adaptation and awareness. Most of countries find it difficult to allow digital currency as a mainstream payment option due to its uncontrolled nature. Reserve bank of India has not banned Cryptocurrency legally but it has instructed all banks and financial institutions to discourage cryptocurrency usage. Supreme Court of India has removed restriction from digital currency trading in India which becomes positive news for virtual currency platforms and Investors.
List of most famous Cryptocurrencies
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Apart from above list facebook has also launched a cryptocurrency named Libra.
What is Cryptocurrency/ Bitcoin mining
Mining is symbolic in terms of Cryptocurrency as it really doesn’t mine anything but validate. Cryptocurrency mining is a digital process in which transaction of a digital currency are verified and added to existing block chain’s digital record ledger. These transactions are in from of Buy and Sale of currency or a product or service available on various online platforms. Every transaction creates a block of information in form of a code string or Hash, miners solve that hash puzzle to verify the transaction and give the proof of work to network. Proof of work from a miner completes a transaction and add that new information block into block chain. Miners get reward for this work in form of a transaction fee and fraction of cryptocurrency
Functions of Cryptocurrency Miner
Basically a cryptocurrency miner performs 3 Functions
- Confirming Translation by solving hash puzzle
- Creating new cryptocurrency in system
- Providing security to block chain with faster processing
Is it possible to mine cryptocurrency with your laptop or mobile
Answer to this question depends upon the currency we are talking about. Few currencies(bitcoin) has evolved so much that mining for them need specific GPU hardware(ASIC Miner) for faster processing which is not possible for household computer(even high end gaming computer).
At present mining through personal computer is not profitable as professional organizations using specific professional ASIC miners for this processing. These miners can do just one job which is mining and they do it really super efficiently which can not be matched by personal computing machine. If we compare both ASIC will be like a horse and personal computer will be just like a tortoise so chances of competing and solving a mathematical puzzle is very slim for PCs.
Hopefully we have covered all basic questions related to cryptocurrency from a beginners point of view . Please comment your questions or doubts about cryptocurrency in below comment box.
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