Cryptocurrencies
Decentralized cryptocurrency is produced by the entire cryptocurrency system collectively, at a rate which is defined when the system is created and which is publicly known. In centralized banking and economic systems such as the Federal Reserve System, corporate boards or governments control the supply of currency by printing units of fiat money or demanding additions to digital banking ledgers. In case of decentralized cryptocurrency, companies or governments cannot produce new units, and have not so far provided backing for other firms, banks or corporate entities which hold asset value measured in it. The underlying technical system upon which decentralized cryptocurrencies are based was created by the group or individual known as Satoshi Nakamoto
As of May 2018, over 1,800 cryptocurrency specifications existed.Within a cryptocurrency system, the safety, integrity and balance of ledgers is maintained by a community of mutually distrustful parties referred to as miners: who use their computers to help validate and timestamp transactions, adding them to the ledger in accordance with a particular timestamping scheme.
Most cryptocurrencies are designed to gradually decrease production of that currency, placing a cap on the total amount of that currency that will ever be in circulation. Compared with ordinary currencies held by financial institutions or kept as cash on hand, cryptocurrencies can be more difficult for seizure by law enforcement.This difficulty is derived from leveraging cryptographic technologies.
Blockchain
The validity of each cryptocurrency's coins is provided by a blockchain. A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography.Each block typically contains a hash pointer as a link to a previous block,a timestamp and transaction data.By design, blockchains are inherently resistant to modification of the data. It is "an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way".For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority.
Blockchains are secure by design and are an example of a distributed computing system with high Byzantine fault tolerance. Decentralized consensus has therefore been achieved with a blockchain.It solves the double spending problem without the need of a trusted authority or central server.
The block time is the average time it takes for the network to generate one extra block in the blockchain.Some blockchains create a new block as frequently as every five seconds. By the time of block completion, the included data becomes verifiable. This is practically when the money transaction takes place, so a shorter block time means faster transactions.
MINING
In cryptocurrency networks, mining is a validation of transactions. For this effort, successful miners obtain new cryptocurrency as a reward. The reward decreases transaction fees by creating a complementary incentive to contribute to the processing power of the network. The rate of generating hashes, which validate any transaction, has been increased by the use of specialized machines such as FPGAs and ASICs running complex hashing algorithms like SHA-256 and Scrypt.
This arms race for cheaper-yet-efficient machines has been on since the day the first cryptocurrency, bitcoin, was introduced in 2009.With more people venturing into the world of virtual currency, generating hashes for this validation has become far more complex over the years, with miners having to invest large sums of money on employing multiple high performance ASICs. Thus the value of the currency obtained for finding a hash often does not justify the amount of money spent on setting up the machines, the cooling facilities to overcome the enormous amount of heat they produce, and the electricity required to run them
Wallet
A cryptocurrency wallet stores the public and private "keys" or "addresses" which can be used to receive or spend the cryptocurrency. With the private key, it is possible to write in the public ledger, effectively spending the associated cryptocurrency. With the public key, it is possible for others to send currency to the wallet
Impact of Cryptocurrency?
Cryptocurrencies have come a long way from their relatively obscure origins. While the mainstream financial world may have once disdained digital currencies as tools for criminals, terrorists or rebellious individuals frustrated with traditional money, in the past months the industry has made significant progress in establishing itself as a legitimate and (potentially) world-changing space.
Digital currencies like bitcoin (BTC) and ether have paved the way, growing massively in unit value, user bases and daily transaction volumes—and dozens of new cryptocurrencies have followed in their path. That being said, cryptocurrency is not without its detractors. Many skeptics continue to argue that the space is a speculative bubble ready to burst. Another type of criticism that has not gotten as much notice, however, is one having to do with the environmental impact of digital currencies. In this article, we’ll explore potential impacts that digital currencies could have on the environment and present some different viewpoints about how this may play out into the future.
Importance of Cryptocurrencies
The benefits of digital currency are a plethora. Not only is it good for the business or the business owner but the buyer themselves. Of course if you purchased a specific crypto and it has shot up in price, you’re buying using pennies on the dollar. In the long term, it definitely pays off.
•Easy access
Cryptocurrency is readily available to the general public. Almost anyone can make use of it. It is a decentralized operation and investors from all over the world have easy access to them. You can find various projects trying to raise funds through cryptocurrency. Almost anyone that can make online fund transfers can become part of such projects.
•Quick and easy payments
Making payments using cryptocurrency is very easy. You can do it in just a matter of a few seconds. It is very fast because you don’t require to feed many details, you don’t even need to enter your credit/debit card details. All you need is the address of the wallet of the person or enterprise to whom you wish to make the payment too. The amount shall credit to the receiver within few seconds to a few minutes depending on the crypto. The ease of transfer and the low transaction fees makes it very desirable.
•Fast Settlements
With cryptos, you don’t need to wait a couple days for your business to receive the money. Due to the technology cryptocurrencies are based on, the blockchain, it removes delays, payment of fees and a host of other third party approval that might have been present. For traditional businesses, there are often hiccups and bottlenecks due to the number of middlemen that you have to cut through. With cryptocurrency transactions, there is a quick settlement as the peer-to-peer nature of the networking structure cuts off the middleman.
Crypto contracts were designed to eliminate the bottlenecks that have come to characterize traditional settlement. The settlement is immediate and can be completed for a fraction of time and expense that it would have taken a traditional transfer
•Lower Fees
We’ve all been there and sometimes it could be painful just to view your monthly account statements from your bank. You’ll often be shocked at the number of fees chalked up. Transferring money by using any other online forum or bank gateway is expensive as they levy considerable fees for the transaction. Credit card processing companies charge hefty fees. But it is not the case with cryptocurrency as the costs are nil or negligible. With credit cards or debit cards, the seller is the one paying a fee but for crypto’s, it is the buyer paying the small fee. The issue with these fees is that they often pile up and could quickly pile up. Transaction fees are very miniscule and only the buyer gets hit with it.
•Private
You don’t need to share your identity or whereabouts or the details of the transactions made between you and the beneficiary. No information is required to share with the government and the bank regarding the deal. It is truly decentralized.
•Highly secured
All your transactions will be secure as it is using NSA created cryptography. It is next to impossible for any person other than the owner of the wallet to make any payment from the wallet, unless they were hacked which there are many ways to protect yourself from.
•No Third Party
You are the master of your money. You can keep it in your wallet and use it as per your wishes. There is no third party involved like a bank on whom you need to trust.
With everything in life, there are always pros and cons and this is why you need to weigh both actions thoroughly before making a decision. For cryptocurrency, it’s ascension has been due to its ability to initiate secure and untraceable transactions. Now, that the technology is here, only time will tell if the rest of the world will accept it.
As of now, cryptocurrency has no significant reception which is a major drawback but slowly and steadily it is consolidating its position. Both developed as well as developing countries are legalizing and regulating the use of cryptocurrency in some way or another. Even countries with a high political restriction like Russia and China are trying to make it so people can be able to freely spend them. We can already see Bitcoins effect on the economy. It is very large and only growing at an outstanding rate.
Singapore and Switzerland are the most advanced countries in the use of cryptocurrency as of now. Clearly, the advantages do overcome the disadvantages and this is the reason why the base of cryptocurrency is increasing. After seeing the benefits of using cryptocurrency, people are more than willing to accept the risks involved. This article will help you to form a better perspective on its use. Like anything else, there are few shortcomings but the positive aspects outshine the drawbacks.
