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In the last few years a lot of development came in the information and communication technology sector because of which many activities of our daily life have been merged online and they became more pliant and productive. Cryptocurrency is an encrypted intangible and valuable objects which are used electronically in different applications and networks such as online games, social networking, virtual worlds.
This technology is developed 12 years ago, it is a digital asset designed to work as a medium of exchange that is secured by strong cryptography to secure the online financial transactions, control the creation of additional units and verify the transfer of the additional units.
It has decentralized control means that the planning and decision making are distributed and is controlled by non- government bodies. As it uses decentralized control it means it opposes centralized digital currency and central banking system. It may revolutionize the digital trade market by creating a free-flowing trading system without any third party.
Keywords: Cryptocurrency, Bitcoin, cryptography, decentralize, centralized, digital currency
There is no doubt that this is an era of information and communication technologies because of which many opportunities have been created.
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Financial and business sector are one of the biggest Sector which took the benefits from this technology. A large number of online users has activated virtual world concepts and creating a new business phenomenon, a result of this new type trading the transactions and currencies have been arising.
One of the biggest financial form that have been emerged in past few years is Cryptocurrency.
Cryptocurrency is an electronic currency created with controlling its creation and protecting transactions, while hiding the identity of the user. Crypto- is short form of “cryptography”, and cryptography is computer technology used for security, hiding information, identities. Currency simple means “money mostly in use”. It is a digital form of cash which is designed to work faster, to provide more reliability and to be cheaper than our government issued money or the legal tender.
Instead of trusting a government to create your money and banks for storing, sending, receiving money users transact directly with each other without any intermediate (government) between them and they can store their money themselves. As peoples can directly send the money without a middleman, transactions are usually very affordable and fast. For the purpose of prevention from fraud and manipulation, every user of a cryptocurrency can simultaneously record and verify their own transactions and others transactions as well. “Ledger” is used for storing the digital transaction recordings and it is publicly available to anyone, means anyone can verify the transactions which is done by others. With this public ledger transactions become efficient, permanent, secure and transparent.
When you have a ledger, you don’t need to trust a bank to hold your cryptocurrency, you don’t require to trust the person with whom you are doing business to actually pay you. Instead, you can see by yourself the money being sent, received, verified and recorded by thousands of people. This system requires no trust. The first cryptocurrency was bitcoin.
The first cryptocurrency was launched in 2009 named as Bitcoin by Satoshi Nakamoto, Bitcoin was not regulated by a government or institution and no third party was involved, it was open source from peer to peer transfer. This cryptocurrency used blockchain technology. There was a time when you could count the number and types of cryptocurrency on hand. But today it is no longer possible. The crypto market has immensely grown. Ten years ago, cryptocurrencies were an academic idea, which is largely unknown to the world’s general population. This all changed in 2009 when Satoshi Nakamoto came with his new invention which is termed as “Bitcoin”. Nakamoto never want to invent a new currency.
The most important thing of Satoshi invention that he found a way to build digital cash system which is decentralized. In the 19th century, there have been many attempts to create digital money, but they all failed. After seeing all the failures Satoshi tried to build a digital cash system which is decentralized. Like peer to peer network file sharing.
It is an Internet based exchange medium in which cryptographical functions are used to conduct the transactions of finance. It uses blockchain technology to gain decentralization, transparency. The most important thing about cryptocurrency is it is decentralized; it is not controlled by any central authority. This nature of the blockchain makes cryptocurrencies theoretically more immune as compare to the old ways of government control and interference.
Cryptocurrencies transactions can be done directly between the sender and receiver by the help of public and private keys. These transactions can be done at minimal processing fees which allows users to avoid the steep fees charged by traditional financial institutions.
According to the Thomas caper who was US Senator - “Virtual currencies, perhaps most notably Bitcoin, have captured the imagination of some, struck fear among others, and confused the heck out of the rest of us.”
Today most of the peoples knows about cryptocurrencies, although they are not that much familiar with how the system works. Azoth Analytics in August 2019 stated that, the cryptocurrency Market has valued 856.36 Billion dollars in 2018. The key factors which facilitates the high demand of cryptocurrencies are high remittance in developed countries, increasing fluctuations in monetary regulations, and growth in venture capital investments coupled rising awareness among the inventors especially in developing countries.
Earlier before cryptocurrency online transaction was centralized and a third party trusted by both sender and receiver was involved. The third party maintained a ledger for both sender and receiver but with the arrival of cryptocurrency in 2009 which uses blockchain technology for peer to peer transfer, many problems of traditional online transactions were solved. The major problem was unaccountable spending, suppose when we do a physical transactions we have the track of money which is given by one person to another and it is a physical material which is delivered by sender to receiver and thus receiver no longer holds it, but in case of online transaction we do not have a physical material so no track is kept and one can make a copy of the amount he possess and do multiple spending.
For example- A has a 100 rupees and B is the receiver, so A makes a digital transaction of 100 and sends to B but what if A keeps a copy of file and sends to C. Thus, A can do multiple transaction with the same amount leading to an unaccountable spending.
The problem of unaccountable spending in digital transaction was removed by cryptocurrency using blockchain technology.
Blockchain technology enables peer to peer network and keeps track of all the cryptocurrency it uses Public & private key encryption and digital signatures to verify transactions.
Blockchain technology makes cryptocurrency a transparent system and a self-run decentralized system.
Here, when a transaction is carried out from A to B, then a record of transaction is put on the ledger and the ledger is owned by every user of the cryptocurrency. The record of transaction is put on the ledger after a verification. Verification of transformations is done by miners who verifies the transaction and then adds it to the public ledger.
For verifying transactions miners are rewarded with cryptocurrencies. Mining involves high quality tools and technology and a very strong computing system.
As we know that cryptocurrency is self-run but for verifying transactions some type of governance also is required so cryptocurrency uses open source governance also known as miners who uses strong computers to verify transactions and adds it on the public ledger and in return the miners are rewarded with small amount of cryptocurrency for verifying transactions.
The future of cryptocurrencies is very broad as they are more and more users looking for a decentralized digital cash system, where they don’t have to depend on the third party. Cryptocurrency such as bitcoin and Ethereum have been widely used in the recent years and the researchers say that by 2027 the cryptocurrency market is going to touch sky high. Bitcoin and Ethereum have been widely used by many corporate companies and financial institutions to buy and sell commodities.
Cryptocurrencies has been disapproved by many governments all around the globe as they believe since it is not been governed by any organisation and if there is any kind of financial loss to people then no one is accountable.
The use of crypto currency in the recent years in the dark web has increased they are used by people for smuggling and trafficking and also for gambling. There are many more developments required in the area of cryptocurrencies and how we can improve it, with the advancement of technology we can see new ideas being implemented within next few years.
Complete Study on Cryptocurrency. (2024, Jan 24). Retrieved from https://studymoose.com/complete-study-on-cryptocurrency-essay
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