The financial market, a marketplace for trading, has been improving with the precession of time. Following the advancing technology and increasing awareness, people gained enough knowledge to challenge the centralized system of banks by introducing a new system, Cryptocurrency. Cryptocurrency is a decentralized system that has evolved paper money into digital money, giving more autonomy to the owner.
What is Cryptocurrency?
Cryptocurrency is an exciting virtual asset that has caught the investors’ attention with its digital ledger of transaction and decentralization. In simpler words, cryptocurrency is a wholly digital currency that involves exchanging crypto tokens without any interference of an intermediary, using blockchain technology. Unlike other forms of digital money, cryptocurrency is pretty risky but seems attractive to the investor anyway for the greater potential returns associated with it.
There are over 10,000 cryptocurrencies available today, and Bitcoin is the most famous and original among all of them. Other alternatives were invented to add versatility and diversity to the crypto market, each with a different objective.
The purpose of cryptocurrency is to give the authority of the digital money to the owner himself, unlike other traditional currencies, which are backed by a central banking system. This way, the owner gets his total share without cutting the third party commission or with their limitations.
Crypto is a term derived from the Greek word ‘kryptós’ which means “concealed.” As the name says, cryptocurrency uses various encryption algorithms and cryptographic methods to keep your entities safe and secure, making it nearly impossible for snoopers or hackers to attack or counterfeit.
How Does Cryptocurrency Work?
As mentioned earlier, Cryptocurrency uses blockchain technology, a digital ledger of transactions that have changed the entire prototype of the previous currencies. There’s no authority over these transactions and is broadly distributed among the network of computers of crypto users. It works like a credit card except, you exchange your digital assets for goods instead of actual money.
To make a transaction through this peer-to-peer exchange, both parties must have a digital wallet. This wallet lets you transfer your assets while maintaining confidentiality.
The assets come with private and public keys. The private keys let you send the currency, while the latter enables you to receive the currency forwarded by the other party.
Another process involved in the working of cryptocurrency is Cryptocurrency Mining. This is a very technical and complicated process to verify the transactions, but at the same time, it is sporadically rewarding as well. This is an attraction for the investors for tokens, transactions fees, and coins they get as a reward for their cryptocurrencies.
Why Is Cryptocurrency So Popular?
There’s no doubt in the fact the value for cryptocurrencies has skyrocketed in no time. The price for Bitcoin has doubled, and that of Etherum has quadrupled as of today. The reason for its popularity is:
- The decentralization of this currency has removed the central banks for these banks, add unnecessary limitations and reduce the value of money.
- Blockchain technology has such a recording system that makes it nearly impossible for cyber-attackers to hack the system.
If you ever consider opting cryptocurrency as your financial getaway, you can look over this article to get to know more about cryptocurrency and the technology associated with it.