Definition: A cryptocurrency is defined as an encrypted data string representing a unit of currency. The cryptocurrency, also called as crypto-currency or crypto, is a decentralised digital money based on blockchain technology and uses cryptography to secure transactions. It's also a digital payment system that doesn't use intermediaries like Banks, Government or regulator to verify transactions. It also functions as peer-to-peer (P2P) system, enabling transfer or receipt of funds anywhere to anyone, having digital wallet. To understand cryptocurrency, it is essential to know about three terminologies used - decentralisation, blockchain, and cryptography.
Terminology: Decentralisation means no centralised or regulating authority monitoring rise or fall of cryptocurrency prices. The price movement is determined entirely by demand and supply forces. Since its supply is not evenly distributed, the possibility of volatile price movement is not ruled out. Blockchain refers to distributed ledger technology, which is a digital and secure ledger accessible by authorised users. It also serves the purpose of recording transactions such as buying, selling, and transferring. Cryptography secures data from unauthorised access, using encryption techniques. The privacy, security and anonymity features claim made by blockchain, are enabled through Cryptography.
The First Cryptocurrency History: The origin of cryptocurrency technology dates back to year 1980, when blinding algorithms were invented. These algorithms are all about secure and unchanging digital transactions. In 2008, a group of people including Satoshi Nakamato formulated guiding principles of the first and most popular cryptocurrency Bitcoin. Bitcoin was formally launched to the world in the year 2009, however, it took more than 3 years to be accepted as means of payment among leading merchants. The same blockchain technology is currently used in the Banking, Insurance and other Industries.
Cryptocurrency Working: The cryptocurrencies are created through a complex process of mining. The process involves solving of mathematical puzzles over specially equipped computer systems, involving large energy consumption, when miners are rewarded with bitcoins or cryptocurrency units in exchange. Users could buy or sell crypto through crypto exchanges, brokerage houses, P2P exchanges, and payment processing platforms. Cryptocurrency so bought could be stored in hot (active) or cold (passive) digital wallets. Cryptocurrencies could be seamlessly transferred from one wallet to another one. An investor could invest in cryptocurrency or transact using acceptable cryptocurrency for buying goods or services, trading purpose, and converting them into cash.
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