The Cryptocurrency World
A cryptocurrency is a virtual form of currency which is digital in nature that is used as a medium of exchange between participants in the same network. It is different from traditional methods of payments because it is not regulated or controlled by the government or financial institutions but rather is controlled by computer algorithms. The users also record transactions rather than a third party i.e. banks. It relies on the internet and users on a network who verify every transaction.
Cryptocurrency is a generally new method of payment which is not very popular in the world. There are many jurisdictions and countries that are not even aware of what this name implies. Since cryptocurrency is digital in nature, it has no physical presence which makes it more difficult to understand and to be implemented effectively. There are a host of currencies that exist under the cryptocurrency banner but the most well-known is Bitcoin which was created back in 2009.
This article will discuss the various types of cryptocurrencies. It will also point out the pros and cons of using this method and also a look into the future of cryptocurrency and if it will be able to be more efficient and easy to use.
Types Of Cryptocurrencies
There are various types of currencies that fall under this banner. They came soon after the success of Bitcoin and they include:
- Litecoin. It is a peer to peer cryptocurrency which processes a block every two and a half minutes as compared to Bitcoins for ten minutes.
2. Monero. One can substitute every unit of currency by another.
3. Peercoin. It uses a hybrid approach so as to minimize the amount of electricity required to power it. Bitcoin requires a large amount of electricity to be powered.
4. Dogecoin. It has a 100 billion coin production schedule as compared to others.
5. NEM cryptocurrency. It uses a proof of importance system so as to timestamp transactions.
Cryptocurrency is bought through other people via marketplace or by mining. Mining involves solving very difficult and complicated mathematical equations and once the problem is solved, the miner will be rewarded with new Bitcoin. It is very expensive to mine cryptocurrencies since you will require a lot of hardware which does not come cheap.
This is a very competitive process since all participants’ wants to get the reward and this will make the equations much more difficult to solve. One can also buy Bitcoins through Bitcoins ATM. These are machines that allow one to insert cash in exchange for Bitcoins which will be given as a receipt.
There are a number of these ATMs especially in London and the United States. Bitcoins are also known as peer to peer electronic cash systems since all its activities are decentralized. Public ledgers of all transactions that have occurred within the network are recorded in what is known as a blockchain.
Here, everyone’s account balance is visible. The transaction is a file that consists of the senders and recipients’ addresses and the number of coins transferred. The transactions must be signed off by the sender with their private keys. Bitcoin is still the most dominant of the cryptocurrencies but other cryptos have emerged which has seen its major share in the crypto market significantly reduced.
There is consensus on all the participants in any cryptocurrency network regarding the transactions and balances in their accounts. Once one has acquired Bitcoins, they can either invest or buy goods with them. For example, Apple has accepted various different cryptocurrencies as a method of payment using their services such as in the app store.
There also exists a cryptocurrency market cap where users can keep track of the volume and prices of the existing cryptocurrencies. Once you buy the cryptocurrency, they are stored in what is called ‘wallets’. It is the secure way to store your funds.
Merits Of Cryptocurrencies
1. They are easily accessible to the general public since all their activities are decentralized. All that is required is internet access and you are good to go.
2. The cost of a transaction is very minimal as compared to credit and debit cards. Credit cards charge very hefty fees when transferring money from one bank to the other and this can be very annoying sometimes. This is not so for the cryptocurrency method.
3. There is no third party like a bank involved in a transaction. This means you keep your money and use it whenever you wish.
4. Cryptocurrency offers quick payments since no credit or debit card details are required but only the address of the wallet of the person to whom you wish to make payments to.
5. The transactions in cryptocurrency are decentralized which means that it is controlled by its own network. This means that the network operates on a user to user basis.
Demerits Of Cryptocurrency
1. The value of a cryptocurrency is volatile. This means it has the ability to plummet very fast in a very short amount of time.
2. Investors are also frequently targeted by hackers who have an intention of stealing their crypto cash online.
3. As earlier stated, it is very difficult to understand how it works because it is a relatively new and comes with a learning curve. Therefore people do not know exactly how to invest and are afraid to do so.
4. Cryptocurrency is limited in its use since it is not accepted widely. Not many businesses or people use it as a means of payment.
5. Cryptocurrency also raises concerns about money laundering and tax evasion and its appeal to illegal traders. This is what worries law enforcers and that’s why it has been outlawed in certain parts of the world such as Bolivia and Bangladesh.
Cryptocurrency World Guide Conclusion
For now, cryptocurrency has not had such a significant reception which is a major setback. Regardless, there is a major market that is yet to be tapped if it is rolled out in a way that is easily understandable to the public. There should be the need for a public forum where members of the public are able to ask questions so as to have a better understanding.
There are countries that have started to use this form of currency and it is working well for them for example Switzerland. This article highlights the merits and demerits of using cryptocurrency. Clearly, people still need time to adapt to this method since the traditional means of transactions is still very popular.
There is still a future for cryptocurrency but it will take time to have a significant impact. There is still work that needs to be done in educating the public but all in all, there is great potential for it in the world.