What is Cryptocurrency?
You must have been wandering, What is cryptocurrency, how to buy cryptocurrency, types of cryptocurrency, how does cryptocurrency work and is cryptocurrency work in real world? Let us try t find answers for all these questions in this article.
Technology has altered the way we work, shop, and communicate even pay for goods and services we enjoy. Well! we have come far ahead of the barter system in which mankind used to pay goods for buying other goods while service for another service rendered. The physical currency has replaced the barter system. We have taken a few more steps to use virtual currency for buying and selling goods and services. I mean to say we are now making contactless payments like Google pay, phonepe, Paytm pay, Paypal payment, and many more payment systems. The new digital currency that is making sound today is cryptocurrency.
I assume you must have heard about bitcoins. It was a first cryptocurrency gone into the mainstream of payment systems. Bitcoins have been grabbing the attention of the world through this currency does not earn regulatory approvals for the official transaction. We will not discuss too much about bitcoins in this blog since it is a comprehensive discussion topic by itself. Let us discuss that in our future articles.
In this article, let us understand what is cryptocurrency and how it impacts our daily life and what are the benefits of using cryptocurrency. A cryptocurrency is simply digital money introduced to replace physical currency which we have been using for centuries. Cryptocurrency enables users to make or receive payments without personally meeting for the transaction.
Cryptocurrency financial transactions remain purely on the database and hence can not be manipulated in entries. When the funds are transferred through cryptocurrency, the financial transactions are recorded in a public ledger and cryptocurrency transactions are stored in a digital wallet.
Safety and security of Cryptocurrency
Now let us talk about the security of cryptocurrency. Cryptocurrency earned its popularity and name from its feature of encryption to validate the transactions. Highly advanced coding arrangements have been made to store and transmit between wallets and the original ledger book. One of the main reasons for the popularity of cryptocurrency is its ability to secure the information and safeguard the funds in an account. This is the major reason why people use cryptocurrency even when the governments of different countries have denied approving the use of digital currencies.
Cryptocurrencies are typically constructed using blockchain know-how. Blockchain illustrates the way transactions are logged into “blocks” and time imprinted. It’s a pretty complicated, technical process, but the result is a digital ledger of cryptocurrency contracts that’s hard for hackers to manipulate the accounts. In supplement to this, cryptocurrency transactions involve a two-factor verification process.
For example, you may be requested to enter a username and password to begin a transaction. Then, you may have to enter a verification code that’s sent through text to your phone number. But guarantees are in place, that don’t involve cryptocurrencies are free from hackers. Several high-dollar journos have cost cryptocurrency stratus severely. Hackers knocked Coin check to the tune of $534 million and BitGrail for $195 million during 2018. That made them two of the greatest cryptocurrency flunkies of 2018, according to authentic sources.
People often use cryptocurrencies for easy and quick payments while saving transaction charges on the payments made. A few individuals consider cryptocurrencies as the investment avenue hoping its value will rise considerably. The cryptocurrencies can be bought using our credit cards, debit cards, and bank accounts. The process is popularly known as ‘mining’. The cryptocurrency can be stored either online or in wallets according to our requirements.
Types of Cryptocurrency
Let us now understand the types of cryptocurrency being used in the markets. More than 3000 cryptocurrencies are being used across the world. However, all these cryptocurrencies fall into any one of the following three categories as shown below:
Some of the most common cryptocurrencies are listed below:
How Does Cryptocurrency Work
Generally, cryptocurrency mining is an extremely challenging and painstaking job. Cryptocurrency mining is also a costly yet rewarding activity. Due to the attractive rewards, many across the world involved in cryptocurrency mining activity since it pays in two ways
- Miners remuneration
- Rewards with crypto tokens
The main draw for many Bitcoin miners is the possibility of being compensated with useful bitcoin tokens. You need not be a miner to own cryptocurrency tokens. You can also buy cryptocurrencies utilizing fiat currency; you can exchange it on an exchange like Bit stamp using another crypto. You even can receive it by performing video games or by printing blog posts on programs that pay users in cryptocurrency. An instance of the latter is Steemit, which is kind of like Channel except that users can pay bloggers by paying them in a patented cryptocurrency called STEEM. The STEEM can then be traded elsewhere for bitcoin.
The bitcoin incentive that miners get is an incentive that encourages individuals to help in the main objective of mining: to help, legitimize, and observe the Bitcoin system and its blockchain. Since these duties are circulated amongst many users all over the world, bitcoin is said to be a “decentralized” cryptocurrency. That means it does not belong to any government or central bank.
How to Buy Cryptocurrency
Buying cryptocurrency through looks complicated, it is easy when you chunk the entire process into comprehensive stages. You need not understand complicated programming mathematics to buy cryptocurrency. Let us see the entire process of buying cryptocurrency simply.
Location for buying cryptocurrency
Before you dive deep into cryptocurrency, you need to understand where and how you can buy this currency. Before you finalize the thought to buy cryptocurrency check whether the regulation of your country supports you in the buying process. There are different places where you can place your order for cryptocurrency. For example,
- Online exchanges
- Bitcoin ATMs
- Person to person with Voucher cards
Some of the popular exchanges may include
Selection of Payment Method
Choose the payment method through which you prefer to pay for buying cryptocurrency. Online transfer, credit card payment, and wallet payments are accepted. The wallets can be further classified into
- Desktop or Mobile Wallet
- Online Wallets
- Hardware Wallet
- Paper Wallets
Some of the digital wallets may include:
- org (Desktop)
- com (Mobile)
- io (Desktop)
- io (Desktop/Mobile)
- io (Desktop/Mobile)
Check the transaction fees or charges to buy cryptocurrency on a website. Because often the charges on the transactions make the whole deal unattractive.
Secure your currency
As soon as you create your wallet, you need to take care of securing your coins by doing a backup. Because losing access to your wallet is similar to losing your physical currency. Soon after you launch your currency wallet, you will be given a phrase with 12-24 words. Some wallets show the phrase only once during the acquisition and hence you must make a note of phrase as soon as you see the same. Please secure the phrase since those who have access to these phrases can directly access your currency. So, do not disclose it to anybody including to your children, parents, spouse, grandparents, blood relatives, or any close friends.
Make necessary arrangements to save this phrase even during natural calamities like fire, earthquake, flood, or any other disasters.
The 12 words backup phrase looks like below:
Sending & Receiving Cryptocurrencies
The most critical section of our currency wallet is your address. This is the address you can use for sending and receiving cryptocurrency. The address may look like below:
This is exactly like your bank account number which is unique across all the customers.
Track your transactions
This is the last and most important stage in the process of dealing with cryptocurrencies. Most of the cryptocurrencies including bitcoins run on public blockchains and hence get saved and viewed by anybody online. Also, the users can access them by using block explorer and this network shows the live feed of cryptocurrency transactions.
Is Cryptocurrency Legal?
Since, we are dealing with the currency, it is important to see is cryptocurrency legal? and how to handle currencies in adherence to the regulatory environment. Fast forward to mid of 2020, the question “ is cryptocurrency legal? Continue to be a valid and reasonable question across the world. A few countries have accepted cryptocurrency while many countries being scared about the possible threats. The lack of clarity on whether it is safe and can become a universal currency, the speculations continue to make noise in the currency markets. As of Feb 2020, the Bitcoins in the U.S.A, the U.K, Japan, and Canada were considered valid with legal tender. However, some of the countries like India and China have imposed a strict ban on the use of cryptocurrencies. However, neither country has criminalized the act of holding cryptocurrencies. In India, the legal tender of cryptocurrency has not been defined clearly. There is some discussion encouraging the use of cryptocurrencies. Even in the countries in which the cryptocurrencies are allowed, the taxpayers fall into trouble during the tax payment. Yet, the cryptocurrencies are considered under the asset class “property” and taxed accordingly. Even where Bitcoin is legal, most of the laws that apply to other assets also apply to Bitcoin. Tax laws are the area where most people are likely to run into trouble. For tax purposes, bitcoins are usually treated as property rather than currency. Bitcoin is generally not considered legal tender.
Surprisingly, in march 2020, the Supreme Court of India has lifted the ban on transactions in cryptocurrency resulting in a sudden spike in currency exchange transactions. Though the supreme court given nod to the banking cryptocurrencies, the clarity on permissions for mining is still in the air.
I hope you are now clear about what is cryptocurrency, how to buy cryptocurrency, types of cryptocurrency, how does cryptocurrency work, is cryptocurrency work
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