Everyone has been talking about cryptocurrencies, their legality, and whether or not it is a viable investment choice for the past few years. But what exactly is cryptocurrency? What technology has it implemented? This post will go over the fundamentals of blockchain and cryptocurrencies.
What is Cryptocurrency?
A cryptocurrency is distributed over the internet as a digital currency. These currencies are virtual currencies but with no central controlling authority. The transactions with cryptocurrencies are fast, direct, and seamless, irrespective of the geographical location of the transacting parties. It is like any other form of digital cash. The accounting of the transactions is done using a distributed ledger anyone can not alter.
In simple words, we can describe cryptocurrencies as digital currencies created by the masses, controlled by the masses, and for the use of the masses. It has many advantages over fiat currencies. It is one of the main reasons the government and many banks are against introducing cryptocurrencies into the financial system.
Blockchain is the underlying technology for cryptocurrencies. This technology is helpful in many applications, and cryptocurrency is one of its applications. The financial records kept by the banks and other financial institutions are susceptible to hacking. But as the record of cryptocurrency is kept using blockchain technology, supported by the cryptographic invention, the risk of hacking information is zero.
What is Fiat Currency?
The government backs fiat currencies. Examples of the fiat currencies are AUD (Australian Dollar), GBP (Great Britain Pound), USD (United States Dollar), JPY (Japanese Yen), CNY (Chinese Yen), and INR (Indian Rupee), etc.
There are many advantages to the Fiat Currencies. As they are centralized, the central agencies can make them invalid with just a decision. For example, in 2016, India did a demonetization drive.
Central authorities can print the currency at their desire, resulting in a rise in the inflation levels. The poor are becoming poorer because of the impact of inflation.
Agencies like Master-card and Visa are required for the transactions with Fiat Currencies. People need to spend some fees to store their money in the banks. The transacting parties pay significant fees to mediator companies like Western Union to transfer funds across the borders.
Cryptocurrencies are free from all the disadvantages, as mentioned earlier. The most significant advantage of cryptocurrency is that it has adopted distributed ledger backed by blockchain technology.
What is the significance of blockchain?
Blockchain technology stores the information in an irreversible chain of incorruptible blocks as a distributed ledger. They kept much valuable information in these ledgers. Record keeping plays a vital role in international diplomacy in the finance sector.
What is Crypto Exchange?
Crypto Exchange is a website where an investor can trade and exchange one cryptocurrency for another. These are the platforms only for the exchange of cryptos. These platforms do not allow investors to buy cryptos using Fiat currencies.
Where cryptocurrencies can be purchased using Fiat currency.
Earlier, only Bitcoins could be purchased in exchange for fiat. For buying other coins, investors need to transfer Bitcoins to crypto exchanges. But, now, investors can buy many cryptocurrencies from various websites for fiat currencies.
Whether we could purchase cryptocurrencies using credit cards?
CEX.IO is the most popular and convenient platform for buying Ethereum and Bitcoin using Paypal, credit cards, and bank accounts. Another available option is Changelly.com for buying cryptos using a credit card.
Can investors store my funds somewhere else than exchange?
Yes, investors can move the funds to personal wallets if they aim to hold some cryptos for a longer duration.
What is the role of a wallet?
Wallets have a structure similar to a bank account. It stores the public keys and corresponding private keys to receive and send cryptography funds.
What are Public keys and private keys?
We can compare the public key with the email username and the private key with the email’s password. Every wallet has pairs of public and private keys.
If we want to have our email id, we have to open it with a service provider, say google for Gmail account. Your email id’s username and passwords are like the public key and private keys for sending and receiving the funds to your crypto wallet account.
Final Thoughts: In this article, we discussed concepts like cryptocurrency, blockchain, wallet, and public and private keys. The following article will discuss different kinds of wallets, keys, and other exciting terms in the cryptocurrency industry. Please feel free to comment on your queries in the box below. Team Blockchain Shiksha would be happy to solve your questions.©
Thank You!
Pingback: NFTs Vs Cryptocurrency: What's the difference -
Pingback: What is DIFX Exchange?