What Is Cryptocurrency?

What Is Cryptocurrency

Cryptocurrency, as the name suggests, indicates an encrypted currency. Encryption ensures the authenticity and security of the currency used for transactions. In addition, no intermediary involvement is needed during the cryptocurrency transactions which makes it decentralized. 

In cryptocurrency, it consists of two things in particular: cryptography and currency. Cryptography is used to secure or protect an information which intends to be given only to a specific person. The method secures the data in such a manner that other than the person it is subjected to while for everyone else, it's incomprehensible. 

Cryptocurrency Becoming the New Age Money

Cryptocurrency does the same in case of sending the money. The transaction from one end gets encrypted and only displayed to the person after getting decrypted at the recipient's end. The whole process takes place using algorithmic encryptions. 

Cryptocurrency is a virtual form of currency that is driven by blockchain technology. Since blockchain activities allow numerous nodes to operate, this eliminates the need of a central authority, and makes the whole process decentralized.  

Like a person needs a bank account to keep their traditional currencies and use it for transactions like activities. Cryptocurrency users need a crypto exchange account to buy cryptocurrency. Same platform could be used to initiate crypto transactions. However crypto owners could use specific crypto wallets to store crypto assets. 

For many reasons cryptocurrency is said to be the new age currency. Given their many distinct benefits and advantages over the traditional currencies. These offerings includes:

  • Decentralization
  • Secure Transaction
  • Faster Transaction 
  • In-expensive Transaction
  • Paperless Transaction
  • No limit over transaction amount
  • Double spending

Decentralization: Cryptocurrencies are decentralized by nature given they use blockchain technology. Neither an intermediary nor a central authority like banks can interfere or influence the crypto transaction.

Secure transaction: With the encryption, security comes alongside the cryptocurrencies. The person at the sender’s end can initiate the transaction. With no third party interference, cryptocurrencies become immune to any potential security threat.
Fast transaction: Crypto transactions are way faster than traditional currencies transactions, especially when it comes to cross-border payments. International payments using traditional fiat currencies can take one day to five days, depending upon various factors. In contrast, Bitcoin (BTC) takes only ten minutes to complete a transaction.

Cheap transaction: Even the transaction fees while making cryptocurrencies transaction is way cheaper. The fees imposed over the transaction is only to reward the nodes or validator who manages the whole process.
Paperless transaction: Since crypto is a permissionless asset that requires no paperwork. Unlike traditional currencies, cryptocurrencies manage the transactions along with keeping the transactions recorded digitally over the blockchain itself.
No Transaction Limit: During transactions using fiat currencies, there stays a limit over the transaction amount. However, cryptocurrencies are free from this boundation. Any amount of crypto can be sent to anyone, anywhere in the world, of course with a crypto exchange account and other alike several requirements.

Double spending: Double-spending is a common flaw that beginners who lack a basic understanding of crypto, come across. Some bad actors manipulate the transaction and use the same money to spend more than once for different transactions. This could be easily done with human involvement or sometimes tamperting the technology. Blockchain tech underlying crypto transactions, counters both the issues hence restricts double spending.

Can’t be stolen: Again with blockchain in action, stealing any crypto asset is nearly impossible. Neither it is stored in physical form nor is it easily reachable without permission. 

Overall cryptocurrencies emerged from the idea to liberate traditional finance from central authorities and free from intermediaries. More and more people coming together with this idea.
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This information is for educational purposes only and does not constitute investment advice. No person should rely on it to make any investment. Investing carries risks, including the loss of capital. All opinions expressed are subject to change without notice. Past performance is not indicative of future results. Always seek the advice of a licensed investment professional before making any investment.