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WHAT IS CRYPTOCURRENCY?

 Cryptocurrency is basically a virtual currency that is not possible to imitate. The ‘cryptocurrency’ is derived from the encryption techniques. These cryptocurrencies are based on blockchain technologies. A blockchain, in simple words, means a database to keep records about the holders of the currency. Because these currencies are digitally operated and not issued by any government agents or authorities, there is eventually no political interference or manipulation.

 The first even blockchain launched cryptocurrency was Bitcoin which till date is the most famous crypto. Apart from that, there are various other currencies with different functions available in the market now that it has become such a hot topic.

Bitcoin was launched in 2009 by a group known as ‘Satoshi Nakamoto’. Over 18.8 Million crypto are being circulated in the market with a total market cap of $858.9 Billion as of August 2021 and there are only 21 Million currencies available leading to the reduction of chances of both inflation and manipulation. Some of the other alternate currencies include Litecoin, Peercoin, Namecoin, Ethereum, Cardano and Eos.

Crypto generally allow for safe payments online which are referred as ‘tokens’ and the ledger entries of these exchange of tokens are stored digitally. Many investors make money out of these currencies by selling them to other investors at a profit.

Cryptocurrencies claim that it makes it easier for financial transactions between two parties as it does not require any third party that needs to be trusted with their money. These transactions are secured by a private key. A private key is one that is only known by the owner of the account and is used by him to sign away transactions. This uses the least of transaction fees unlike the banks and other financial institutions which charge a certain amount for wire transfer.

A downside of these currency is that it is partially anonymous which makes it easier for illegal business like tax evasion and money laundering. However, this anonymity is highly valued by some individuals considering it acts like a protection for those activists who live under a repressive government.

The market price of any product depends upon its demand and supply and similar theory applies to cryptocurrency. The rate at which one currency can be exchanged for another can fluctuate widely which makes it a risky business to invest in. The cost of producing a crypto, especially Bitcoin, which is an extremely large amount, depends upon its market price.

It is also a fact that only the blockchain of these currencies are digitally secured. The other aspects of it like ‘wallets’ and ‘exchanges’ are not highly secured. They are still prone to hacking and in the past 10 years, there have been cases of millions of dollars being stolen via hacking of some mere coins.

The fact cannot be ignored that cryptocurrency has only been in the market for 10 years. It is not some gold or a piece of land that can be bought and guarantee you a profit in future. It is a completely different and new technology that needs knowledge and awareness. Just like stock market, one needs to be fully educated before investing their valuable money into this business.