For this article, I shall be using ways to define Cryptocurrency so that we can get what it means in every aspect of the word and how we can relate to it easily.
- Cryptocurrency can be said to be a digital money that isn’t physical coins or notes that can be held and felt, but one that exists only in computers. It is also digitally stored in a special kind of computer program called a Blockchain.
Or one can say:..
- Cryptocurrency is a type of digital or virtual currency that uses cryptography for security. It is not a traditional currency issued by governments and central banks, and they operate on decentralized networks based on Blockchain technology.
If Cryptocurrency is not issued by the Government or central banks, is it safe?
- Over the years, this has been the question and to simply understand how safe it is, the supply of every cryptocurrency minted can be controlled and to ensure that transactions are secure and safe, complex codes are used.
Can I use Crypto currency like I use the government issued money I have known all my life?
- Yes! Cryptocurrency like your government can be used to transact online and even offline. Most recently people have become really comfortable with accepting cryptocurrencies for online and offline physical transactions and that is all thanks to the level of sophisticated technology embedded in to ensure trustless and seamless process of exchange and sale.
- Having access to money that one can spend anytime and anywhere without ever stepping into a bank makes one feel like they have their own secret vault that allows them to transact across borders and boycotting the government’s bottleneck policies that stifles most of the time.
Cryptocurrency and its Key features.
To understand Cryptocurrency, you must know its key features so you can make decisions based on that knowledge for when you are using them online or offline.
- Decentralization: This is the first thing you will hear as a key feature of Cryptocurrencies. By decentralization, we mean that, there is no central authority that can come out to say there is a lack of it or how to tighten its usage and acceptability. Cryptocurrency is a financial infrastructure built on and operated on decentralized networks of computers, often called blockchain.
- Limited Supply: This is one major feature that will help curb inflation in a monetary system. The ability to control supply of said token enables fair flow and usage. (There are many countries around the world that do not know the total supply of the currencies which is an indicator of looting and corruption being bred.) Cryptocurrencies being created to have a limited supply means that there can only be a maximum number of coins that can ever be created. This model is in place to create scarcity and potentially influence value over time.
For example, the total supply of Bitcoin is capped at 21 million coins.
- Peer-to-Peer Transactions: One of the biggest hindrance to growth and free flow of financial transactions are the middlemen/intermediaries (banks, money exchange agents) who always have to take a commission on every transaction and they also cause delays.
The existence of Cryptocurrencies enables direct transactions between users without the need for intermediaries like banks. This feature often leads to faster and cheaper transactions, especially for international transfers.
- Blockchain Technology: The Blockchain technology is by far the most innovative technology of modern times. The blockchain as a chain of blocks is the underlying fabric that powers Cryptocurrency and also ensures transparency, security, and immutability of every transaction history.
Transactions in cryptocurrencies are recorded on a public ledger called the blockchain and thai allows for immutability, transparency and speed. This technology has made it possible for millions globally to move funds across borders seamlessly and safely as well.
- Cryptography: For cryptocurrencies to be created, controlled and used, cryptographic techniques are needed to secure transactions and also to control the creation of new units. Cryptography is a method of using codes to protect and secure transactions and information so that only those for whom it is intended can process and access the same.
To successfully complete any crypto transaction, Public and private keys are needed to ensure security and immutability.
- Volatility: Cryptocurrency prices are and can be highly volatile. The market moves unpredictably fast in both directions and this can happen in a time one least expects.
The value of a cryptocurrency can experience significant fluctuations over short periods, presenting both opportunities for profits and the risk of losses for investors.
- Use Cases: The use case for Cryptocurrency is very wide and far reaching. Apart from being used for online purchases, remittances, investments, and as a means of transferring monetary value across borders, the application of certain infrastructure as enabled by blockchain technology enables use in supply chain management, smart contracts, and decentralized finance (DeFi) protocols.
- Anonymity and Privacy: Would you look at that? While being able to ensure transparency of transactions on the blockchain ledgers across board, there can be some level of anonymity to certain transactions.
Some cryptocurrencies are created and designed to provide enhanced privacy and anonymity. Over the last couple of years, there have been projects like Monero, Zcash and dash building a privacy and anonymity infrastructure for its cryptocurrency.
The features of Cryptocurrency vary across board and it provides the opportunities that many are seeking. Lots of projects are being built on the blockchain technology and with the introduction of Web3 and its growing popularity, we are poised to see more advancement in the crypto sphere.
Bitcoin, created in 2009, was the first cryptocurrency, and since then, thousands of alternative cryptocurrencies (often called altcoins) have been created, each with its unique features and use cases.
