The World Of Cryptocurrency

6 min readFeb 24, 2021

What is a Cryptocurrency?

A crypto currency is a digital or virtual currency and can be used as a form of payment that can be exchanged online for goods and services. A crypto currency is similar to a real world currency but that it doesn’t have any physical embodiment. It uses cryptography in order to operate. One example of a cryptocurrency is Bitcoin. However, there is a limit to how many units can exist as for BTC there is no more than 21 million and after this no more BTC can be produced.

A cryptocurrency works using a technology called blockchain. Blockchain is a decentralized technology which is spread across different computers or nodes all over the world that manages and records all the transactions that are done under complete security.

Cryptocurrency removes central banks from managing the supply of money due to the fact that the bank over the time tends to lower the value of money through inflation. On the other hand we can see the smart move towards decentralization in terms of cryptocurrency. The cryptocurrency uses blockchain since it is decentralized in the process and recording system and is completely secure compared to the traditional payment systems.

What is a decentralized technology?

Decentralization, in general refers to the distribution of the activities or decision making power in a particular group or organization or institution from one single authority to several local offices. However, in decentralized blockchain technology it refers to a transfer of control and decision making process to a distributed network. In a decentralized network no one is required to know or trust each other since each member has the copy of data. If one user alters or tampers with any transactions then it can lead to the rejection of the ledger by the majority of the network.

The blockchain operates in complete transparency because of its decentralized nature as each entity can view their transactions using their personal node or viewing it in blockchain explorer that allows anyone to view their transaction or any transactions occurring live. Along with the addition of each new block each node has its own copy of the chain which gets updated.

Why is cryptocurrency special?

As C in cryptocurrency refers to cryptography, it uses the method of encryption and decryption to secure communication in the presence of the third party with an ill intend or who wants to steal the data given. Cryptocurrency uses computational algorithms such as SHA-256. In the case of Bitcoin it uses hashing algorithm, a public key-a digital identity of the user which can be shared with everyone and a private key-a digital signature of the user that is kept by the user.

Special features of Cryptocurrency

Cryptocurrency offers some good features which cannot be found in the real world currency transaction. First, It has little to no transaction cost thus making it absolutely cheap. Second, we can have 24/7 access to money therefore there is no requirement to go to the bank in the middle of the night to withdraw money during an emergency. Third, there is no limit to purchase and withdrawal. Fourth, there is a freedom for anyone to use it. No paperwork or documentation is needed. Fifth, international transactions are faster within a minute rather than waiting for number of days.

Advantages of cryptocurrency

Cryptocurrency is fast, easy and cheap to use. Cryptocurrency is fast and does not require any transactional fees unlike the traditional banking system. It does not require any maintenance or minimum balance fees, no overdraft charges and no returned deposit fees, among many others.
Cryptocurrency is fully secure. As cryptocurrency uses a decentralized blockchain technology each transaction that is made by the user is secure and cannot be hacked. If attempts are made to hack any ledger or to alter any transaction then there will be a cross referencing from the other ledgers and the alteration will be denied by the majority of the nodes.
The details of the transaction and the user are fully safe. An absolute discretion is employed while using any cryptocurrency. A user can keep himself anonymous while using any transaction therefore it will not be easily traced back to the user thereby keeping the user and the transaction anonymous.
Cryptocurrency allows peer to peer transactions and everyone can see each other’s transaction. A cryptocurrency user can make a transaction with someone who also holds a cryptocurrency anywhere around the world without any interference from outside sources.
Cryptocurrency has no boundaries for transactions. Transaction can be done anywhere within the world with very low international fees. With the fiat currencies under the central government requiring fees to transact anywhere in the world and the wait time is longer, cryptocurrency being decentralized has very low transaction fees with very little to no waiting period.

Disadvantages of cryptocurrencies

The payments are not reversible. One of the flaws of cryptocurrency is its nature of irreversibility. Once the transaction is made it cannot be reversed and if the transaction is made into a wrong wallet then the currency cannot be retrieved hence making it non refundable. This gives rise to cheaters to cheat others out of their money by creating a wallet to commit such kind of scam.
No way to recover the wallet if someone loses it. The developers use virtually untraceable source code, strong hacking defenses, and an impenetrable authentication protocols. These make it safer for the user to store money in the cryptocurrency wallet. However, if a holder loses his private key then there is no way to retrieve back the key and the wallet will remain locked forever and the coin inside it thereby causing financial loss of the user.
Although cryptocurrency uses decentralized technology, the flow and amount of certain currencies are still managed and governed by some creators and organizations. The holders can manipulate the prices of the currencies for their own economic gain. One example is the popular Bitcoin whose amount doubled several times within the year 2017.
Cryptocurrency was used for several illegal and criminal activities. Because of the high security and privacy of the crypto transaction it becomes almost impossible for the government to keep track of any transaction. Thus crypto transactions become susceptible for illegal trade and activities. For instance, Bitcoin was used for illegal activities like drugs under the table and also money laundering.

What is the future of cryptocurrency?

Even though cryptocurrency has gained wide popularity, it seems that the world is divided when it comes to cryptocurrency. On one hand we can see supporters who are in favor of cryptocurrencies like Bill Gates, Al Gore, Elon Musk, Richard Branson, who advocates that cryptocurrencies are better than regular currencies. On the other hand, there are people like Warren Buffet, Paul Krugman, Richard James Shiller, who are both Nobel prize winners in the field of economics calling it a ponzi scheme for criminal activities.

Buffet stated regarding cryptocurrencies:

“It doesn’t make sense. This thing is not regulated. It’s not under control. It’s not under the supervision [of] any…United States Federal Reserve or any other central bank. I don’t believe in this whole thing at all. I think it’s going to implode.”

There might be a conflict between the regulation and anonymity since several cryptocurrencies have been linked to terrorists and illegal attacks namely Bitcoin, the main emphasis lies on keeping the users anonymous.

It has been estimated that by the year 2030 cryptocurrency would occupy 25% of the national currencies. There will be a significant acceptance of the cryptocurrencies by the merchants and customers. As the cryptocurrencies will continue to have their own wallet the prices will continue to fluctuate like the past several years.

Conclusion

The world of crypto currency is evolving with several investors investing on it and others throwing shadows of doubt due to the the potential of vigorous price fluctuation while other financial investors suggesting not to invest at cryptocurrencies at all. With the current trend of the crypto world nobody knows what holds the crypto future since investors rallying to invest and others suspicious, it is quite unfathomable regarding the secure future of the currencies due to its instability in nature and making the right investment is still a question of widespread speculation and concern for the dubious and the critics.