What is cryptocurrency?
The first cryptocurrency was introduced in 2009 by Satoshi Nakamoto called “Bitcoin” Bitcoin is the most famous cryptocurrency and most valuable in terms of market capitalization. When bitcoin started has a value of a fraction of a dollar and recently bitcoin touched its all-time high of over $68,000. Currently, the value of a bitcoin is around $48,000 and is believed to be more and more in the future. So far no one knows who is Satoshi Nakamoto and precisely how much bitcoin he owns. Nowadays there are several cryptocurrencies out there like etherium, binance, Dogecoin, Shibainu Solana, etc.
What Is a Blockchain?
Blockchain technology can be defined as a decentralized, distributed ledger that registers the origin of a digital or virtual resource. Any information on a blockchain can’t be altered, which means it’s next to impossible to tamper with any transaction once it’s made. In simple words, it is a database that stores encoded blocks of information then links all the blocks in a chronological order to form a chain-like structure, and changes in these added blocks are impossible once added to the chain.
How Does Cryptocurrency Work?
All the cryptocurrencies run on an algorithm and this algorithm runs on several computers across the globe. Further, these serval computers are then interconnected through some kind of network say internet. Whenever there has to be any transaction, the computer will process it and capture all the data of the transaction in the form of blocks. Since there are several computers doing the same thing there will be several transactions. Once the transaction is completed these computers will add the blocks of the transaction in a single chain with the help of the algorithm in chronological order.
Since each computer in the network has this algorithm every computer will have the same chain. If we try to tamper the transaction algorithm will verify the transaction with all the connected computers. When the algorithm will find that only one copy has different data than the rest in the network it will not validate this transaction that is why hacking or tampering of this is impossible.
What is cryptocurrency mining?
Crypto mining is a process of production of cryptocurrency by solving complicated mathematical equations with the help of powerful computers. So this process consists of authenticating the data blocks and then adding the transaction to the blockchain. This process allows or introduces new coins or tokens in circulation. People who are involved in the mining process are called crypto miners. These days crypto miners use high-end graphic cards for mining purposes.
Difference between cryptocurrency and token
The main difference between cryptocurrency and token is cryptocurrency has is native to the blockchain where like Bitcoin, Etherium, Solana, etc. While tokens are produced on an existing blockchain using the smart contacts.
Future of the cryptocurrency
When started market capitalization was negligible but currently in January 2022 market capitalization of the crypto is mover 2 trillion USD. If cryptocurrency was a country then it would have been the world’s 9 biggest country in terms of nominal GDP and this is when crypto is not having good times. So in the future crypto will overtake several countries in terms of market capitalization.
There are several reasons for the boom like increased demand of the crypto as returns are high in a short period. More crypto is adding to the pipeline. Many companies have started accepting crypto as a payment method like Tesla earlier used to have bitcoin as a payment method for its cars then now they have accepted Doge for some merchandise & products. Many companies started crypto-centric products like AXE started doge deodorant. Even crypto seems to be very promising to some countries like El Salvador become the world’s first country that makes bitcoin legal tender. The increasing craze of NFT is also responsible for the boom. Experts believe that this will keep increasing in the coming time. Currently, India has the most number of crypto holders across the globe.
Why financial institutions are afraid of cryptocurrency?
Usually, any financial institutions and bank generate income either by lending money to the customers or becoming the mediator of any financial transactions between the service provider and service receiver. Since crypto is working as peer-to-peer, there is no involvement of these and hence they lose a huge amount of money. It is the biggest nightmare of the financial institutions and Banks. Cryptocurrency can disrupt its market. To keep these institutions safe countries are not letting the crypto become legal tender.
Should you invest in cryptocurrency?
Before investing in crypto it should be your own decision and you should know all the pros and cons of the same. Crypto indeed gives high returns but at the same time, it’s highly risky and volatile. Although it is decentralized and no one controls it, some wales manipulate the price of the crypto since price depends on the demand and supply. Wales are whales are individuals or institutions who hold large amounts of crypto. There have been several scenarios when a wale inflates the price of particular crypto by purchasing the biggest chunk and when the price gets high he liquidates all the crypto and a sudden huge supply crashes the price of the crypto. So investing in crypto or not is totally your personal decision.