Cryptocurrency is commonly called crypto-currency or crypto. These are digital or virtual currencies, in which cryptography is used for secure transactions. Cryptocurrencies are not issued by any central agency or regulating authority,
rather they are based on a decentralized system, in which new units are issued along with keeping records of every transaction. Here we give you detailed information about cryptocurrency.
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What is Cryptocurrency?
Cryptocurrency is a digital payment system in which the transaction is not verified by the bank. This is a peer-to-peer system, through which users can make payments to anyone at any time. Additionally, users do not need to carry currency with them in physical form or actually exchange currency.
Instead, payments in cryptocurrencies are made through specific transactions, in which the payment is entered into an online database. Whenever someone transfers cryptocurrency funds, the transaction is recorded in a public ledger. Cryptocurrencies are stored in digital wallets.
Cryptocurrency got its name due to the use of encryption in verifying its transactions. This means that from storing the cryptocurrency in the wallet to making the transaction, advanced level coding has been used. The main purpose of encryption is to provide security and safety. Bitcoin is the most famous and first cryptocurrency which was launched in the year 2009.
How does cryptocurrency work?
Cryptocurrencies are based on a public ledger, called a blockchain. In this, transaction records of all currency holders are updated. The process of preparing cryptocurrency units is called mining, in which complex mathematical problems are solved to generate coins, for which computers are used. Users can buy cryptocurrencies with the help of agents. These can be stored and spent using cryptographic wallets.
If you have cryptocurrency, you don’t have anything physically. You have a key, through which you can make payments with your cryptocurrency. Although Bitcoin has been in use since 2009, the use of cryptocurrencies and blockchain technology in finance is growing rapidly. It is possible that its use may increase in the future. This technology is used in transactions of bonds, stocks and other financial assets.
How do transactions take place in cryptocurrency?
Now you might be wondering how money is transacted in the crypto market, then let us tell you that like a bank account, digital currency transactions are done through wallets. Although the wallet is under the control of the people. This wallet has two addresses – public address and private address.
- Public address means the place where you send funds. Therefore, to send digital currency from one wallet to another, a public address is required, that is, it is necessary to enter the public address of the person to whom the cryptocurrency is to be sent.
- To access the cryptocurrency inside the wallet, a ‘password’ or ‘private key’ is required. When you send a transaction from one wallet to another, it is secured by blockchain technology. Let us tell you that unlike government-backed currencies, the value of virtual currencies like crypto depends entirely on supply and demand.
Examples of Cryptocurrencies
Bitcoin: Bitcoin was established in the year 2009. It is the first and most famous cryptocurrency.
Ethereum: After Bitcoin, the most popular cryptocurrency is Ether (ETH) or Ethereum, which is based on blockchain.
Litecoin: Litecoin is also one of the popular cryptocoins. Litecoin is known for its innovation, fast payment and transaction process.
Ripple: Ripple is a distributed ledger system that was founded in 2012. Ripple is used to track different types of transactions, not just cryptocurrencies. Ripple’s developer company works with different banks and financial institutions.
Non-Bitcoin cryptocurrencies are commonly known as “altcoins”.
How to buy cryptocurrency?
To buy cryptocurrency you have to follow some steps…
Step 1: Selection of platform
First of all you have to decide which platform you want to select. You can choose between a traditional broker or a cryptocurrency exchange.
Traditional Broker: Nowadays many online brokers offer the option to buy or sell cryptocurrency. These brokers also offer the option of bonds, stocks and other financial assets along with cryptocurrencies.
Cryptocurrency Exchanges: Exchanges are also a good option for buying cryptocurrencies. These exchanges offer cryptocurrency, wallet storage, interest account options.
Before choosing these platforms, you should check how much they are charging and what features you are getting in them.
Step 2: Add funds to the account
Once you have chosen the platform, the next step is to fund your account so that you can start trading. Most crypto exchanges allow users to purchase crypto using their debit or credit cards using fiat (government-issued) currencies such as US dollars, British pounds, or euros. Purchasing crypto with credit cards is considered risky, and some exchanges do not support credit cards. Cryptocurrencies are highly volatile, so it is not right to buy them by taking a loan. Some platforms also accept transfers and wire transfers.
Step 3: Placing Order
After adding funds to the account, you have to place the order for cryptocurrency on the web or mobile platform of the broker or exchange. Along with this, users can also invest in crypto currency through fintech apps like PayPal, Cash App, and Venmo. Through these apps, users can buy or sell crypto currency.
How to store cryptocurrency?
As soon as you buy cryptocurrency, you need to store it safely and protect it from hackers or thieves. Typically, cryptocurrencies are stored in crypto wallets, which are physical devices and stored online. Along with this, some crypto exchanges also provide wallets to the users. Two types are used to store cryptocurrencies – hot wallet and cold wallet.
Hot Wallet Storage: Online software is used to store cryptocurrencies in hot wallet. Users are not charged any kind of fee for this.
Cold Wallet Storage: In this, offline electronic devices are used to store cryptocurrencies. Users have to pay for this wallet.
- Questions and Answers (FAQs)
Why is cryptocurrency called decentralized currency?
Cryptocurrency is a digital payment system that does not rely on banks to verify transactions. It is secured by cryptography, hence the name cryptocurrency.
- Usually when transacting with rupees (physical currency) or when one person sends money to another, the bank checks whether the sender has sufficient funds in his bank account or not. After this the transaction is approved. In this the bank is the central authority. But this is not the case in cryptocurrency.
- When someone has to send crypto, the transaction is verified by hundreds of thousands of computers, which are running on the same algorithm. When thousands of computers are involved, there is no longer a need for a central authority like a bank to ensure the success of the transaction. That is why it is called decentralized currency.
- For this, blockchain or distributed ledger technology is used. When you transfer funds in cryptocurrency, the transaction is recorded on a public ledger. It uses encryption to verify transactions. This means that crypto transactions also involve advanced coding.
- The purpose of encryption is to provide security and safety. Let us tell you that the first cryptocurrency was Bitcoin, which was introduced in 2009.
Is cryptocurrency safe?
Cryptocurrencies are generally created using blockchain technology. Blockchain means that transactions are recorded in blocks. This is quite a complex technical process. Therefore, it is difficult for hackers to tamper with the digital ledger of cryptocurrency transactions.
Transactions require 2-factor authentication. For example, to initiate a transaction you may be asked to enter a username and password. You may then also have to enter an authentication code sent via text to your phone. Even after security, it cannot be said that cryptocurrency is completely safe from hack. In recent years, crypto hackers defrauded Coincheck of $534 million and BitGrail of $195 million.
What is the status of cryptocurrency in India?
- There are about 10.07 crore crypto owners in India, which is the highest in the world.
- America is in second place with 2.74 crore crypto owners and Russia is in third place with 1.74 crore.
- With 7.30 percent, India ranks fifth in terms of crypto by population, while Ukraine ranks first with 12.73 percent of crypto owners.
- There are 1.5-2 crore crypto investors in India.
- Around 1 crore registered users are with WazirX, 1.1 crore with Kinswitch Kuber and 70 lakh with Zerodha.