So you might be wondering what cryptocurrency is? In simple terms, cryptocurrency is nothing but a digital currency. By that, I mean, like other currencies which you can touch and feel. You cannot hold cryptocurrencies in your hand; their presence is truly digital. But as the name says, “Cryptocurrency” acts as a currency from which you can buy goods and services.
Another interesting point you should know about cryptocurrency is that central authorities have to do nothing with it. That means no government can regulate cryptocurrencies. So now, let’s see how blockchain is related to cryptocurrencies.
What is a Blockchain?
These virtual currencies are based on Blockchain Technology. So now let’s understand what a blockchain is? Blockchain is a kind of technology that acts as a public digital ledger of transactions. Moreover, this stores the transactional data in such a way that it becomes hard to alter or hack. Also with the help of Blockchain, individuals deal with each other easily without the interference of any third party, which is another great thing.
So the increasing number of records are usually termed as Blocks, are joined together with cryptography. Every transaction is independent and verified on peer-to-peer computer networks, time-stamped and added to the growing data chain. And after that, nobody can alter recorded data. So now, let’s discuss the types of cryptocurrency.
Types of Cryptocurrency:
To date there are more than 10,000 cryptocurrencies are present in the world. The first cryptocurrency based on Blockchain is Bitcoin. And it still remains the most valuable and most popular when compared to others. In the case of other cryptocurrencies, some are clones of Bitcoin and others are created from scratch.
Bitcoin was first launched in 2009 by an individual or a group with a fictitious name as “Satoshi Nakamoto“. Other popular names of cryptocurrencies are Peercoin, Litecoin, Namecoin, Ethereum, Cardano, EOS.and so on. So after that, let’s see the pros and cons of cryptocurrencies.
Advantages of cryptocurrency:
- Protected from inflation:
Due to inflation, many currencies values decrease with the passing time, since when the cryptocurrency is launched, it is released with a fixed quantity. The source code defines the amount of any cryptocurrency. For example, take the most popular and valuable cryptocurrency, i.e. Bitcoin, globally; its number is 21 million. So when the demand for it rises, its value increases in the market. This fixed number of the cryptocurrency ultimately prevents its inflation.
- Self-governed and managed:
When the cryptocurrency transactions take place, their records are stored on the developers/miners hardware. For this task, developers get a fee for doing so. As a result of which they keep an updated record of transactions, making cryptocurrency self-governed and managed.
- Private and Secure:
The blockchain ledger is built on several different types of puzzles, especially mathematical ones. That makes it nearly impossible to decode it. And due to this reason, cryptocurrencies are more secured than ordinary transactions. For better privacy and security, these cryptocurrencies use fictional names or pseudonyms, which is not connected to any account or user. So these things make cryptocurrencies more private and secured.
As the cryptocurrencies are maintained and managed by the developers who use them, as a result of which they are decentralized, which is the most significant plus point.
Disadvantages of cryptocurrency:
- Illegal transactions:
Since every cryptocurrency transaction is much private and secure, this makes it ideal for illegal transactional activities. And it also becomes tough for the government to track such kinds of illegal transactions. Let’s take the example of Bitcoin; in the past, it has been used to buy drugs from the dark web.
- Financial Losses due to data losses:
For every user, the private key for cryptocurrency wallets is vital. If any user loses this private key for their corresponding wallet, they cannot get their coins back. The wallet will be locked forever with the coins within it of previous transactions. So the loss in data will result in financial loss.
- Bad for Environment:
Since mining cryptocurrency requires a lot of advanced computational power and high electricity input. That indirectly affects the environment as more electricity usage will require more coal to be burnt to produce more electricity to meet the heavy electricity demand of the miners. Hence this negatively impacts the environment.
So we have seen in this post that cryptocurrencies are getting popular day by day. Like most of the other technologies, it has also its pros and cons, which we have discussed above. Let me know what you think about this topic in the comments below. Also, tell whether you like this technology or not. And as always thanks for reading this post.