All you need to know about Crypto currencies

Some may think it is too late to write anything related to cryptocurrencies as the internet is saturated with information about it. Making a reference to being the one who missed the cryptocurrency train is again obsolete as it has been made by many other articles. But the saturation of information on the internet is mostly about Bitcoins. The visibility of Bitcoins has penetrated even to the minds of normal suburban conservative moms. But on the other hand, a significant number of people do not understand the basics of cryptocurrency which is more important than knowledge of Bitcoins.

This article briefs the basics of cryptocurrency, blockchain, DL technology and what forms a basis for the whole thing.

What is a cryptocurrency?

It is a currency or a medium of asset exchange in digital form that enables the transaction between two parties for exchanging goods or services. It is a type of digital, alternative or virtual currencies that are currently in use by the internet crowd. Bitcoin was the first-ever cryptocurrency to gain public attention on a large scale. Now there are about a thousand cryptocurrencies in circulation growing like mushrooms under trees.

Breaking down the definition

As the name suggests, the cryptocurrency is a currency whose transactions are secured by cryptographic protocols. The transaction or transfer of assets between the parties is secured and validated by the cryptography. As we all know, cryptocurrencies have no physical form and it exists only in digital form. Cryptocurrencies are decentralized which means that it does not belong to any country or is not regulated by any authority. This is how it differs from a normal currency.

How does it work?

As it is a decentralized medium of exchange and has no physical form, these are not circulated by the governments to central banks. They are mined by Cryptocurrency miners by solving complex mathematical problems to generate a cryptocurrency of any kind. A cryptocurrency is generated by the miners who verify and add the transaction information to the public ledger which is explained below. The process of mining and technology to enhance the process differs with each cryptocurrency.

The two main technologies that are underlying the cryptocurrencies are the blockchain and distributed ledger technologies.

What are blockchain and distributed ledgers?

A blockchain is a digital, decentralized ledger that keeps track of all cryptocurrency transactions that takes place between individuals. It is a continuously growing set of ‘completed’ blocks arranged in chronological order that has all the records of transactions. The information is not stored in a central repository but is stored in the nodes or peer computer systems across geographies involved. This is called as Distributed Ledger (DL) technology that forms basis for blockchain and cryptocurrencies. The mechanism is very similar to the torrent websites where file management is done through the peers and seeds in the torrent network.

Why do people invest in it and why does it have a value?

These cryptocurrencies have a value because of the people who desire to own them for various reasons. The economic value of cryptocurrencies is proportional to the scale of people interested in owning them. The cryptocurrencies do not have any intrinsic value. It is driven by the belief that it can be bought at a higher price at a later stage. These are just like equity stocks that are just in for the game of legal gambling! Just plays with the mass psychology of motivated or desperate beings.

Renowned cryptocurrencies

As mentioned above, there are about a thousand cryptocurrencies in circulations amongst the internet citizens. However, only a few have managed to attain widespread public attention. A large number of people knows about Bitcoins even before knowing that it is a cryptocurrency! Bitcoin is the most prominent and most valuable cryptocurrency with the highest market capitalization heading to $1trilion.

However, the next most familiar and largest by market cap is Ethereum or Ether. Followed by Ethereum, is Litecoin, Ripple, Bitcoin Cash, Dash etc (not in decreasing order). Cryptocurrencies that are familiar other than Bitcoins are termed as ‘Altcoins’ in the cryptocurrency community. If Bitcoins are alternate currencies, these Altcoins are alternate cryptocurrencies. People investing in these currencies believe that these would be the next big story similar to Bitcoins.

Ripple and Litecoin are the next most favourites amongst the investing community and they are showered light upon based on the success of Bitcoins.

The future of Cryptocurrency

The cryptocurrencies are at a very nascent stage and hence the prediction of its future prospects can be tricky. The emergence of the cryptocurrencies as a mainstream investing medium without the hassles of government regulations sounds appealing to the buyers. But this fact is attracting government enforcement and regulatory authorities to sketch constraints in its operations. We do not know when it will happen, but it is up to happen and it is very clear.

Also, the probability of merchants or businesses accepting cryptocurrencies as a medium of exchange is nowhere close to the desire factor of people who want to own it. Since cryptocurrencies are not regulated by the government, there is no way the governments or businesses can or will do anything to promote its acceptance amongst businesses.

Too bad, The Simpsons were not able to predict the Cryptocurrency or its future in the 90s just like they predicted the political fate of America.

In simple words, the future of cryptocurrencies and the companies involved in it are highly volatile just like its price.

Is the worth and demand of cryptocurrencies justify the hype that is being made? Is this a just bubble like the 2000s? Or is really it a promising way of solving the world’s transaction problems as no one claims? We just have to wait and see.