What do you understand by the term cryptocurrency? You must have heard of Bitcoin, Ethereum, Litecoin, Dogecoin, Zcash, as examples of something called ‘cryptocurrency’. You would have heard Elon Musk talk about cryptocurrency. You would have seen several news articles on the same too.
But again, what is this ‘cryptocurrency’? Google defines cryptocurrency or crypto as “a digital currency in which transactions are verified and records are maintained by a decentralized system using cryptography, rather than by a centralized authority.”
Okay, but…? What is a decentralized system? cryptography? And this so-called centralized authority? How are records of our transactions maintained? Moreover, is this safe?
To simplify it, let’s talk about the barter system which existed a thousand centuries ago. The barter system entailed the exchange of goods with goods. One could trade apples for oranges. It satisfied parties on both ends. However, it could be said that the system was still erroneous.
Firstly, not all units could be divided or subdivided. Livestock couldn’t be cut in half and not lose its value. Requirements could coincide, meaning, if there were two quantities, and what if the seller was interested in having some of both? How could exchanges in such situations be carried out? To an extent, the exchange units could be divided, but not all units could be divided and subdivided because doing so could lose their value.
To overcome these issues, paper currency was introduced. Paper currency made exchanges much easier. All of our day-to-day life transactions are sanctioned to banks, i.e., all of our transactions are reported to a third trustable party called the bank. However, there are issues with this form of exchange too. Such as technical problems could often occur at the bank, the user’s account could get hacked and there is a limit on transactions which makes payments limited and somewhat less versatile. Nonetheless, the digital mode of payment has solved the 24/7 unavailability of banks and removed the time factor from transactions, allowing us to conduct transactions as per our liking, but transfer on transactions is limited more or less.
This is where cryptocurrency comes in. Crypto removes banks from the equation of transactions. These transactions only belong to the users in the network and the network itself. It is a medium of exchange just as paper currency, but the transactions which take place are owned by the network and the participants. They are not responsible to an authority such as the bank. Now, the question is what if these transactions are not reported to the bank or any centralized authority that could take responsibility? Will our security be compromised then? Are these transactions even secure?
To answer this, information on transactions performed is stored in the blockchain. Crypto works using blockchain technology as an underline. It is a block that stores data and this data can only be added but not altered. Cryptocurrencies are cryptographic, i.e., highly encrypted to perform secure transactions between users and prevent data stealing from an ill-intended third party. Transaction details are stored in the blockchain and made personally and publicly available as evidence of the same in the form of a ledger. These transactions are quicker with little to no additional charges unlike authorized payments and also, very versatile in the withdrawal and transfer of units.
However, crypto is a largely debated topic. The debate usually splits the world into three parts; those who oppose, those who support, and those who are unsure on which side they should step. On one hand, crypto provides an opportunity to complete hours worth of transactions within minutes and on the other hand, it could be a hackable and an unauthorized mode of exchange. This is why it is important to understand crypto to find out exactly where you stand! And simply being against it without knowing is not the way to be.
The possibility of vulnerability, obscurity due to lack of duly information, and the fear of anonymity involved in crypto make us think more than twice about making an investment or becoming involved. Crypto has risks just like every other new thing, and therefore, it should be treated with caution. But just like digital payments, it has two sides. It makes transactions faster, limitless — not to mention, accessible to anyone anytime.
The involvement of blockchain technology makes crypto secure enough and makes it already less prone to hacking, but the absence of an authorized unit stirs enough hesitation to balance them both.
It is arguable if or not cryptocurrency is an extension of the internet. But whether we believe it or not, it is the next big thing because the growth of crypto is unstoppable just like a viral piece of content on the net. Many merchants, traders, and customers are already accepting cryptocurrency as a valid mode of transaction. It has been predicted that crypto will owe more than 25% of the nation’s currency by 2030. Still, the term crypto has lots of concern whirling around it. Supporters argue on limitless potential and the bright side while critics argue about the threats.
The second thought that crypto brings to our minds can be balanced by providing easily accessible educational resources and gaining the trust of people by making it safer. Crypto holds both risks and prospects. It holds a lot of opportunities for the future. In the end, it lies on us if we are willing to take this opportunity or not.
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