As an upshot of the Bitcoin white paper created by the pseudonymous programmer Satoshi Nakamoto in 2009, although it was a hot topic even before that, cryptocurrency has become one of the emerging currencies in the present day but not highly emerging.
A digital currency acting as an alternative method of payment secured by cryptography can be merely elaborated as a cryptocurrency. If you want to use cryptocurrency, it’s a must to have a digital wallet which can be either a mobile app, a cloud-based service or an installed software. Every transaction done using cryptocurrency is recorded in a distributed public ledger named Blockchain and encrypted with an algorithm. The digital wallet is used to store the purchased currencies and the encryption keys that help confirm one’s identity so that one can view and link to the required transaction. Starting from Bitcoin, many cryptocurrencies are available such as Ethereum, Litecoin, Dogecoin, TRON, Monero etc. Each of these falls under one of the two categories of coins and tokens.
The category of Crypto Coin consists of coins that operate on their own blockchain such as Bitcoin & altcoins (altcoins – Derived from “Alternative coin”. Represent all other coins except Bitcoin). These coins are valid with any merchant who uses the same currency and is distributed through mining. Crypto tokens represent a digital asset or a service. This is created on an existing blockchain. There are three types of Crypto tokens namely, Utility tokens, Value tokens and Security tokens. These are valid with only one merchant and distributed through Initial Coin Offerings (ICO).
Having a Decentralized peer-to-peer system makes it easier to be accessed by any willing person to join the blockchain as a node for maintaining transactions since there’s no central authority to control, allowing the real owner to have full control leading to reduced risk of fraud. Therefore, any creation of new currency units will be done by solving advanced mathematical problems. This process is known as Mining. As it allows tracking of the flow of cryptocurrency, this is a precious method of payment for industries that value transparency and security.
Moreover, transactions become faster and cheaper as this is free of middlemen like banks facilitating cross-border transactions more which ultimately assists international trade. Any person who does not have access to the traditional banking system is free to use cryptocurrency from anywhere at any time. In the general context, as traditional currencies tend to create inflationary situations, cryptocurrency is a good opportunity to deal with it. This can clear the way for economic stability.
In the end, cryptocurrency is not just a currency used for investment, but one that can be used in our daily life transactions as well with several paybacks.