It really should come as no surprise that the Cryptocurrency we use to transact will eventually be digitalized in an era where everything we do is digital and virtual. Cryptocurrency is one of the newest and most popular digital assets.
“Cryptocurrency is a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.’’
To put it another way, cryptocurrency are digital or virtual currencies that rely on the cryptography, or data encryption, technology. They can be traded internationally with permission. Computer processing power can be used to create these currency.
The market value of gold is approximately $7.7 trillion. On January 1, 2016, the market capitalization of all cryptocurrencies was $7.13 billion.
Now it’s above $300 billion.
Architecture of cryptocurrencies
Blockchain manages all of the data connected to cryptocurrency transactions. In a blockchain, transactions made with bitcoin or another cryptocurrency are publicly and chronologically recorded. It is a list of records that is constantly expanding and contains time stamps and transaction information.
Now, a network is required to maintain the blockchain or the list of records. a group of individuals who make sure all transactions are carried out safely and without inequality.
These people are known as miners, and they employ their processing power to make block chains secure and to keep them operating as intended.
When they support the blockchain system’s maintenance, miners also receive rewards.
So, why is it that many countries are not sure about them?
Think about this tale: a woman has two sons. She gave her older son Rs. 100 and instructed him to split it equally with his younger brother. However, the older brother only gave his younger sibling 20% of his money. When the younger sibling learned of this, he complained to her mother about his brother’s unjust treatment of him.
As you can see, the young child has a mother who will take responsibility for him. But if there were no authority figures like his mother, where would the child go?
Bitcoins and other decentralised cryptocurrencies are examples of this. If all the bitcoins were to vanish tomorrow while you were a buyer or miner, who would you turn to for support or to find out what happened? That poses a serious credit risk.
Numerous instances of fraud, loss, and theft have occurred.
Due to the cyber-attack, which cost subscribers more than $50 Million, large corporations in China, France, and the United States had to shut down.
The drawbacks of cryptocurrency do not end here. They are also utilised for a variety of criminal transactions on the online black market.
There have been more than 18,000 cryptocurrencies produced since the launch of Bitcoin in 2009.
Why do we have so many cryptocurrencies?
Bitcoin experienced an unheard-of growth rate last year of over 2000%, and that too in only one year—not even five or ten. Let’s say it increases by 2000% once again. Therefore, let’s say that one bitcoin now costs Rs. 2,000 but increases to Rs. 40,000 in a year. Sooner or later, there will be a breaking point where further growth is impossible and bitcoin prices will plunge sharply. The other cryptocurrencies enter the picture here.
Investors are aware of the potential importance of cryptocurrencies for the investing sector due to Bitcoin’s inflated growth rate. Different cryptocurrency are being developed by miners with the aim of addressing Bitcoin’s flaws, particularly the transaction speed and blockchain file size.
This has led to the development of several better, more sophisticated, and secure cryptocurrencies.
Bitcoins are similar to the global high-velocity bubble, which will eventually burst. but undoubtedly make some people insanely wealthy.
Another challenge is that people now primarily utilise Bitcoins for investment purposes rather than as money. Bitcoins are exclusively traded on a small number of online marketplaces. In terms of currency, it is lagging behind.
Therefore, if you intend to invest in cryptocurrencies, consider alternatives to Bitcoin that have greater potential.
While Bitcoin might disappear over time, cryptocurrency won’t. given that they lately attracted a global audience and that the number of cryptocurrency is growing rapidly. The majority of people think that daily use of cryptocurrencies is still in the future. The former head of J.P. Morgan’s blockchain, however, holds a different perspective on the matter.
“I think it’s coming sooner than people probably think, but even where the will is, the legal and regulatory framework is challenging.”
– former head of J. P Morgan’s blockchain
In a world where everything is changing so quickly, how can we not anticipate that the means of trade will also change? It’s true that we are too accustomed to utilising money in the traditional ways. Most of the new products initially intimidated us, but once we gave them a try, we were blown away. They eventually end up blending into our lives.
Cryptocurrencies undoubtedly have a lot of potential. But it will take some time before we can accept them into our daily lives.