Before You Understand What Is Cryptocurrency And How It Works, You Need To Understand For What Problems It Was Designed To Solve.
Why Do We Need Cryptocurrency ?
Since Man Evolved Currency Has Been A Very Important Part Of Our Lives. In The Early Ages, They Use The Barter System. The Barter System Involves Goods And Services Being Exchanged Among Each Other.
But Barter System Fell Out Of Use. Because It Had Some Flaws. After Realizing The Barter System Didn’t Work Very Well. Currency Went Through A Few Iterations, Firstly Gold And Then Later Paper Currency Gained Widespread Popularity And Was Used Across The World This Is How The Modern Currency Came Into Existence.
But All Of This Was Controlled By Banks And Governments. This Means That There Was A Centralized Regulatory Authority.
Now Imagine The Scenario Of Doing An Online Transaction To Your Friend. Now, There Are Several Ways This Could Have Gone Wrong.
- A Technical Issue At The Bank . For Example The Systems Could Have Been Down. The Machines Weren’t Working Properly And So on, That Means There’s A Central Point Of Failure Which Is Bank.
- The User Account Could Have Gotten Hacked Or Identity Theft. Because All Information Was Stored In Single Server. So, Professional Hackers Can Hack It Easily.
- The Transfer Limits For The Account Were Exceeded.
- The Other Problem Is, If We Send Money To The People In Other Country. It Takes Time.
- There Are Lot Of Other Problems Regarding With Banks.
This Is Why The Future Of Currency Lies With Cryptocurrency.
Cryptocurrency
The Technology That Is Used In Cryptocurrency Is BLOCKCHAIN.
A Cryptocurrency Is Digital Or Virtual Currency. Which Is Quite Similar To Real-World Currency Just That It Does Not Have Any Physical Embodiment.
Crypto In Cryptocurrencies
Crypto Refers To CRYPTOGRAPHY. It’s A Method Of Using Encryption And Decryption To Secure Communications In The Presence Of a Third Party With ill Intent Who Wants To Steal Your Data.
Now Imagine The Transaction Between Two People. One Of Them As A Bitcoin App ( For Reference ) And Send Money To Other Friends. Then The Processing Takes Place, Here We Are Authenticating The user’s Identity And Checking As He Has The Required Balance To Make The Transaction.
Now After That’s Done the Payment Is Transferred And The Payment Is Received. All Of This Happens In A Matter Of Minutes.
If You Want To Know Clearly How The Transaction Works Read The BLOCKCHAIN Article.
This In turn Removes All The Problems Of Modern Banking. There are No Limits To The Funds You Can Transfer.
Your accounts Cannot Be Hacked. Because It’s Almost Impossible To Hack BLOCKCHAIN.
There’s No Central Point Of Failure. Because It Uses BLOCKCHAIN Technology Which Is Decentralized.
No Limits On Purchases And Withdrawals.
International Transactions Are Faster.
There Are Thousands Of Cryptocurrencies Available But The Popular Ones Are Bitcoin, Ethereum, Litecoin, Ripple.
