Home » What Is Cryptocurrency and Its Inner Workings?

What Is Cryptocurrency and Its Inner Workings?

You have heard a lot about cryptocurrency so let us assume you know nothing about it and want to learn. Voiced opinions inform that it is a form of digital. Cryptocurrency became a virtual currency. It has built upon existing blockchain technology.

What is Crypto Currency?

Cryptocurrency or crypto is a collection of double data. Crypto is working as a means of exchange.

It is not in a physical form like money we know today. Cryptocurrency is fueled by a user base.

Crypto uses a decentralized control as opposed to a central bank currency.

Cryptocurrency is created and previous allocations are then issued by a single user.

At this point it is considered centralized.

That is why anyone can own it. Crypto transactions are faster. They take place anytime meaning it runs 24/7.

People love cryptocurrency and people have turned into millionaires because they owned a few tokens.

The value of the tokens increased, and profit was earned. Just imagine investing $100 and in five months time, the value rose by over 1000%.

Honestly, that is a lot of money where I am from, and people grab this opportunity to better their lives.

Its also risky as it does not always increase, the value may also fall, and you could lose a lot. So, you must trade with caution.

Crypto is hard to monitor or trace and I mean it, because you do not get to share personal details while running a transaction.

That is why most governments are never in support of it. There is no need to guess, therefore the bad guys use this for their illicit transactions. Bitcoin is used for transactions on the dark web.

While that is an advantage it is also a disadvantage of cryptocurrency.

Everyone knows Bitcoin as the most well known cryptocurrency

Advantage of Cryptocurrency is it Prevents Inflation.

Inflation is defined as the rate at which the value of a currency is falling as the level of prices for goods and services rise.

Inflation is the reason many currencies surge in value and then decline with time. Its high in demand because of the value increase.

So, with this, people prefer to save money on cryptocurrency rather than on dollars, euros, or their countries currency.

Because they will eventually lose their value over time.

Crypto cannot be manipulated by a single government.

They do adjust interest rates or even print more money for them to achieve policy goals. This causes inflation but it does not go that way with cryptocurrency.

This does not mean crypto does not experience inflation, it does. For example, bitcoin also experiences inflation. After four years it goes into halving.

This is where the bitcoins that mines is automatically reduced into half or 50%.

Fast and easy transactions.

With crypto currency, transactions are done fast, it has become one of the best solutions for sending and receiving money. Both international and domestical transactions process can be done in little time.

It is Self-governed

Hardware houses the transactions of the miners and developers. They get the transactions fee as a gift for doing so. Its not managed by government or authorities. But the miners do keep records of everything so accurately.

ITS SECURE AND PRIVATE.

Privacy and security are a major concern for cryptocurrencies. In transactions, the details of the receiver or sender is not disclosed like the way we transfer money in bank or other medium. Its just with a code or wallet address. As easy as that.

The blockchain ledger relies on different mathematical puzzles that are hard to decode. It makes cryptocurrency more secure than electronic transactions.

DECENTRALIZED

One of the things we all love, is that with cryptocurrencies they are decentralized.

Decentralization in blockchain can refers to as the transfer of control and decision-making from a centralized entity (individual, organization, or group there of) to a distributed network.

Cryptocurrencies are controlled by the developers. Using it with those who have a significant amount of the coin or by a corporations develop it before it is released into the market.

It helps keep the currency monopoly free and in restraint. Not one organization has the power to determine the worth of that coin. The crypto will kept stable and secure. This makes it different from fiat currencies. Government controls them.

LOW COST OF TRANSACTION

Crypto is a good and an immensely popular means of transactions. Its not just for the security or speed but its low cost of transactions. The transaction rates have been reduced to an exceptionally low amount. There will be no need to use other medium and hence no charges.

Disadvantages of Cryptocurrency.

ILLEGAL TRANSACTIONS.

Its exceedingly difficult for the government or officials to track down transactions because the security and privacy of crypto currencies are difficult to crack down the users by just the wallet address. So many people see this as an opportunity for exchanges of illegal things. The popular crypto bitcoin is a suitable alternative for exchange of cryptos by users in dark web who exchange illegal stuffs like drugs, illegal ammunitions and Bitcoin has been the perfect mode of payment. Well, they do this to hide their identity.

RISK OF DATA LOSS.

This is one thing to be careful about. If you lost access to your data, there is no going back. Developers had in mind to make untraceable ASCII documents, with strong hacking defences, and impassable authentication protocols, for the purpose of making safer to position money in cryptocurrencies rather than physical cash or bank vaults. So, if by any circumstances, a user loses the private key to their wallet, you will not get it back. It will be a bad loss and the coins will remain there locked.

POWER LIES IN FEW HANDS.

These holders can influence the coin for massive swings in its price. Popular traded coins are also at risk, as they could increase massively and fall too.

REFUND OR CANCELLATION POLICY.

One of the major disadvantages of crypto currency is that there is no refund. When there is a problem between concerned parties, or when someone mistakenly sends coins to a wrong wallet address, the sender cannot recover the coin. With this, people cheat others. You can pay for something and do not receive it. The receiver will have no fear. This is because you got no one to lay complain to for the refunds.

HIGH CONSUMPTION OF ENERGY.

Mining a cryptocurrency will require massive computational power and electricity input. For example, mining Bitcoin will require higher computers and sufficient energy.

You cannot do the mining on your simple computer. Bitcoin miners in different countries use a lot of energy when mining.

VULNERABLE TO HACKS.

Cryptocurrencies are secure. Exchanges have loopholes to look for.

Well, exchanges store wallet data of users to know their user ID correctly. The Data is verbatim. This is hackable.

Can you just imagine this when a hacker has access to people’s data? They will transfer the funds away and this is terrible.

I have seen individuals pass data. Data that contains a flaw in the account leading to hacking. Well, its an exceedingly rare occurrence but it still happens.

Hope you learned something new with this post. I have another article that can be worth your time like Best Places to Learn New Skills Online

Kelvin

One thought on “What Is Cryptocurrency and Its Inner Workings?

Leave a Reply

Your email address will not be published.

Back to top