CRYPTOCURRENCY

Bitcoin and crypto are the new buzzwords in the market nowadays. Everyone has an idea that these things exist but no one has complete knowledge about them. There are three categories of people in crypto: dedicated lovers, passionate haters, and those with no idea about it.

Cryptocurrency is a digital currency in which code based on cryptography controls the generation of units of currency and verification and transfer of funds. As per the HDFC report, there are currently over 8,500 types of cryptocurrencies in the world. Unlike, gold or typical currency, it doesn’t have any physical form.

HISTORY

The history dates back to 2008 when an anonymous techie with the pseudonym Satoshi Nakamoto published a paper to solve the problems faced by fiat currency. Currencies that are backed by the government are called fiat currencies like USD, INR, etc.

Satoshi Nakamoto invented bitcoin to fill most of the gaps faced by fiat currency and make it decentralized.

NEED FOR CRYPTOCURRENCY

Fiat currency’s major disadvantage is centralization. One group of bodies controls the whole currency, which can lead to many issues like inflation, demonetization, scandals, etc. Fiat currency completely works based on trust between us and the government.

There have been many bank failures and scandals in recent times. India announcing demonetization, Venezuela hyperinflation case leading to the country’s economic instability. There are many cases where people believe in government but a bad decision taken by them can lead to a drastic change in people’s lives.

Cryptocurrency provided many solutions to the problems faced by using fiat currency.

HOW DOES BITCOIN WORK?

It works on the concept of blockchain, whose idea is decentralization. Instead of trusting a third party(banks) for their transactions, people can directly transfer their amounts from A to B without any middlemen. Each person has thein digital ledger, where they update about each transaction using their digital signature. The signature is formed using a mathematical tool called hash function which depends on the message, public key, and secret key that the individual user already has. This ensures the safety and security of the user’s details.

Blockchain also forms the basis for the new emerging technologies like metaverse and NFTs.

FUTURE OF CRYPTO

The future of crypto looks bright, with many big companies like Microsoft and Tesla investing actively in the crypto market, even accepting payments in bitcoins. By 2025, the global cryptocurrency market is expected to be worth $2.73 billion. Many people around the world have actively started investing in it. Startups have emerged for efficient trading of cryptos. Governments have also started accepting it and are encouraging people to actively participate in this new technology.

There is also a negative aspect to it, as it’s decentralized many people use it illegally to trade weapons and items

As the mining of currency and validation of transactions takes around 8–10 minutes, users might prefer general currency over it in day to day lives. Also, cryptocurrencies are very volatile, which means their value might fluctuate to a large extent in a very short period.

There are these issues like security and volatility for which governments and startups have yet to find a solution. Like phones and the internet which have similar issues like security, they are an integral part of our life because their advantages outweighed their disadvantages.