Cryptocurrency is a digital currency or online money designed to work as a means of exchange. It typically does not exist in the physical form and is not issued by the central authority. The word cryptocurrency is derived from the encryption technique, which is used to secure the end to end networks. Cryptocurrency has become a global phenomenon. The first cryptocurrency was the “Bitcoin,” which was introduced in 2009 after that “Ethereum” is the second-highest.
Cryptocurrency has faced criticism due to many reasons, which are mentioned below in the article. The complex code system is used in the case of cryptocurrencies to keep them secure. Cryptographic protocols are used in cryptocurrencies. So, they allow safe online transactions with the help of a technology named Blockchain. It is tough to hack the transactions because of the complex systems, but some of the components are prone to hacking.
Cryptocurrencies work with the use of a technology called Blockchain. That is a decentralized technology spread across many computers that manage and also record transactions. Technology is safe, which is one of its advantages. A blockchain is a digital ledger of transactions.
Cryptocurrency is a huge force that came into existence in the later years. Earlier, the concept of cryptocurrency existed as a theoretical concept before it finally fully came into the picture. It can replace the existing exchange system; however, its usage is banned in some countries, and only a few Countries allow the use of cryptocurrency. Let’s have a look at the history behind Cryptocurrency.
The first decentralized cryptocurrency “Bitcoin” was established in 2009 by pseudonymous developer Satoshi Nakamoto. Before Satoshi Nakamoto, some developers believed that money could exist in digital form also. But it was he who brought the concept to the forefront, and it was published.
Satoshi was the man who builds the first software where the mining of Bitcoin could be done for the very first time. Bitcoin being the first one of its kind, attracted the attention of many people, and the financial institutions which existed at that time were nowhere near the picture of Bitcoin. It was a new invention.
In 2011 “Namecoin” was established as an attempt to forming a decentralized DNS. This was initially forked from the Bitcoin software. The mining of Namecoin and blockchain was merged, and it could be done simultaneously to avoid competition.
Ethereum was the second generation of cryptocurrency, which came into existence in 2015. It made a widespread impact. It had two new special features. first was the creation of decentralized applications and the second one is the execution of smart contracts among the two parties involved.
After that series of different kinds of cryptocurrencies were released like Litecoin, Peercoin, etc. We’ll explain the best cryptocurrencies in our other section.
Architecture of Cryptocurrency
A cryptocurrency blockchain is a ledger that records all the transactions, or you can also call it a digital recorder of transactions made with cryptocurrencies such as blockchain. It records the entire history of transactions, and the details of the transaction, such as price, asset, and ownership, are recorded and settled with the help of blockchain.
The records of the blockchain can be assessed by multiple people simultaneously. One person at a time. Those people who were involved in the transaction can assess the information about the transaction in the blockchain.
Mining is a validation of transactions. Cryptocurrency mining involves two significant processes. Firstly, recording transactions or adding transactions to the blockchain, and the second one is releasing new currency. It is a perfectly legal activity. Some cryptocurrencies would be easier to than others.
If we talk about our country here, cryptocurrency is not legal tender. But the exchanges are legal; however, the government has made it a matter of difficulty. If we look from an investment perspective, Bitcoin will always be the topmost priority in India, followed by Ethereum and Ripple.
A cryptocurrency wallet is a place where the user can store and retrieve their assets (Digital). It is like the money wallets we have nowadays; the only difference is that it stores cryptocurrencies instead of money. Wallets can be stored in an internal hard drive or external space. Regardless of how a wallet is stored, at least one backup must be there.
Note: Backing up a wallet doesn’t duplicate the actual cryptocurrency units, merely the record of their existence and current ownership.
Some cryptocurrencies are said to keep the user’s identity anonymous; like Bitcoin, only the address, private and public keys are visible in the text string, which does not directly link the person’s real identity. Cryptocurrency is, in fact, famous due to this feature of anonymity. Monero is the most anonymous cryptocurrency there is; its transactions are complicated to trace. The reason being ring signatures and stealth addresses.
Fungibility is the ability of an asset to get interchanged with the same asset in cryptocurrency. A Bitcoin has the same value as another Bitcoin; however, there might be some variance. Not all cryptocurrencies are fungible; talking about the present scenario, some of the crypto coins could be exchanged as fungible assets. Like every other thing on planet earth, cryptocurrency also has certain benefits as well as drawbacks. Let’s have a look at both.
Advantages and Disadvantages of Cryptocurrency
Everyone would like to know the pros and cons of cryptocurrency before investing in an illustrious currency. Here you will find all the advantages and disadvantages of cryptocurrencies that maters. So ladies and gentlemen, let’s get started without any further delay.
Cryptocurrency has many benefits comparing it to physical money. For example, in cryptocurrency, the account cannot be seized quickly, like physical money. Apart from that, there are several other benefits also, which I have mentioned below:
- Payment could be processed within a few minutes.
- Transfer of unlimited funds.
- It is a cost-effective mode of transaction.
- Cryptocurrency is decentralized.
- It is self-governed.
There are drawbacks to the use of cryptocurrency as well, such as the anonymous nature of cryptocurrency make them apt for illegal activities like money laundering and tax evasion. Apart from that, there are several other drawbacks also, which I have mentioned below:
- Susceptible to hacks.
- It can be used for illegal transactions.
- Data losses can cause financial loss.
- Potential for high price volatility and manipulation.
- Adverse environmental impact on mining of cryptocurrency.
Legality of Cryptocurrencies
The legality of cryptocurrency is highly variable across the globe. In some countries, you will find it explicitly allowed to exchange goods and services, and in the majority of other countries, it is banned.
Cryptocurrency is a “censorship-resistant” method of sending money without government interference, central banks, or any other third party. Whatever transactions take place gets shared on the public ledger for all the users involved in exchanging. And as it is decentralized, there stands a fair chance that these users could create a copy of all this data.
Since it is one convenient way of sending and receiving transactions, it is widely popular. However, certain risks are associated with this method of exchange.
Cryptocurrencies have greatly affected the economy of many countries in the whole world, including India. But there are certain countries where you will find the legality of cryptocurrencies, like Japan, Saudi Arabia, South Africa, etc.
The biggest issue that stands between the legality of cryptocurrency lies in the “regulation system.” As the cryptocurrencies do not have a regulation system or the crypto tokens are regulated, the government hesitates to make this commodity exchange legal.
What Are the Most Popular Cryptocurrencies?
Since the beginning of time, currencies have been a big part of humans’ lives in one way or another. From the barter system to the actual money that we all use today, the mode of currency has evolved throughout. Cryptocurrency is one such evolved form. Cryptocurrencies are virtual currencies that can both be bought with traditional money and sold against traditional money. They are used to buy both digital and real goods and services.
As of 2020, there are more than 5000 cryptocurrencies available. Here is the list of best cryptocurrency to invest in:
- Bitcoin Cash
Let us go through all of the above-mentioned best cryptocurrencies one by one.
1. Bitcoin (BTC)
Bitcoin is a digital currency form and is decentralized without a central bank and works on blockchain technology. It uses a peer-to-peer network to perform transactions. Bitcoin is one of the biggest and most valuable cryptocurrencies in the market right now.
Some of the reasons for its popularity are:
- High price: A single Bitcoin can worth $10519.70 U.S. dollars, which is significantly higher than the other cryptocurrencies in the market.
- Major companies that accept Bitcoins: Some of the major companies that accept Bitcoins are Wikipedia, Microsoft, Overstock, and many more.
- It can be easily set up: Coinbase, which is one of the most notable exchanges and digital wallet platforms, support Bitcoin. As a result of which it gets easier to get into the game.
- Support of investors: Bitcoin has been there since the beginning of the cryptocurrency market. It has successfully gained much popularity and a strong following of investors.
Among all the other cryptocurrencies in the market, Bitcoin holds the highest market capitalization. This calculation is made by multiplying the current supply of the currency by the current price, a method known as a circulating supply of currency. This method also indicates how safe or risky investment can be. If the market caps are high, then the risk of investing in cryptocurrency would be less because of a larger number of users. All these reasons make Bitcoin stand out amongst all the other cryptocurrencies.
2. Ethereum (ETH)
Another most popular cryptocurrency other than Bitcoin is Ethereum. Ether is the second-largest cryptocurrency and most popular cryptocurrency used in the Ethereum network and uses a blockchain similar to Bitcoin.
The biggest difference between Bitcoin and Ethereum includes their smart contracts. Smart contracts are self-executing contracts that contain certain terms and conditions of an agreement between the parties and allow transactions accordingly. Some of the benefits of Smart contracts are mentioned below.
- Elimination of third parties in transactions: For example, if you wish to transfer the ownership of your house, you will be able to do this directly with the help of smart contracts. There would not be any requirement for you to pay to third parties.
- Speedy transactions: Easier and quick transactions as everything is done online.
- Verified transactions by hundreds of other users: The transactions get verified and encrypted, and stored on a public ledger, maintaining a record of your transactions. Thus, securing it.
3. Ripple (XRP)
Ripple and its digital tokens are known for their fastest transactions. As compared to Ethereum, which takes about two minutes, and Bitcoin takes about an hour, Ripple processes transactions in nearly four seconds.
Ripple creates a platform for banks and other payment providers to send money across the globe. XRP can transfer any currency over the Ripple network. As Ripple takes only a few seconds to send money across the globe, it helps banks and other financial institutions reach newer markets, serving more customers.
Notable features of Ripple’s XRP tokens :
- A cost-effective option for sending money: Transactions are made in seconds without any high transaction fees.
- Support of notable investors: Both Google Ventures and Accenture have invested in Ripple.
- High scalability: That is having faster transaction speed. In comparison with other cryptocurrencies, Ripple handles 1500 transactions per second.
4. Litecoin (LTC)
The three key features that make Litecoin stand out the most among other cryptocurrencies in the market are blockchain, public ledger, and miners. Let us see how these features contribute to making Litecoin unique.
- Quick transactions: Litecoin takes around 2.5 minutes to process a transaction, whereas Bitcoin takes up to 10 minutes.
- A larger currency supply: In comparison to 21 million Bitcoins, Litecoin has 84 million in total.
- Easier algorithms: Mining transactions take less equipment to solve the algorithms because they are easier to crack than Bitcoins.
5. Bitcoin Cash (BCH)
Bitcoin cash was introduced to improve Bitcoin’s scalability. Bitcoin cash does this by increasing each block size from 1 megabyte (MB) to 8 MBs, and this allows more transactions to get verified at one time. With these improvements, Bitcoin cash might start competing with bigger companies such as Paypal and Visa. It is also working towards reducing its transaction fees.
New Economic Movement (NEM) is a virtual platform focusing more on making its cryptocurrency XEM technically-advanced and updated. Besides a blockchain-based cryptocurrency, NEM is also a payment network for financial transactions. Before the arrival of NEM, the “Bitcoin talk forum user” had planned to introduce NXT. The idea, however, got dismissed due to the generation of the new codebase.
A Singapore-based organization, NEM.io manages and handles NEM. It is a non-profit organization that has generated its own codebase to make NEM more advanced in the transaction process. Although XEM is currently not widely used as a commodity, it holds a twenty-fifth rank in the cryptocurrency market.
IOTA is a platform that does not use a blockchain. Instead, it makes use of a distributed ledger, which involves a technology called the Tangle. Tangle technology is based on a “mathematical concept,” which is called the Directed Acyclic Graphic. This concept is so unique that it makes IOTA stand out amongst all the other virtual currencies. IOTA uses mIOTA as its cryptocurrency.
IOTA does not include any charges and is free to use. The simple reason behind this is that every user plays an equal role in the network transaction.
IOTA has two major features:
Microtransactions: These are transactions that can be worth fractions of cents, i.e., anyone can use these to buy even the simplest of things like coffee.
Speed: In the cases of virtual currencies or cryptocurrencies, speed is measured by Transactions Per Second(TPS). Unlike the other cryptocurrencies, IOTA facilitates speedy transactions as the more the number of users uses IOTA, the faster the transactions get.
Launched in 2017, NEO has joined the race with all the other virtual currencies of the market. Many people often recognize NEO as “Chinese Ethereum” or “Ethereum killer.” It is the first decentralized blockchain-based cryptocurrency that was introduced in China.
Apart from the NEO cryptocurrency, it has another crypto token called GAS; it is used to pay the transaction fees. NEO claims itself as a “distributed network for the smart economy.” NEO focuses on converting traditional assets into digital with the help of smart contracts.
The NEO tokens function as an investment token of the NEO blockchain. It has a hard cap of 100 million tokens that comes in handy during block creation, network management, network changes, and other consensus requirements. The thing that makes NEO unique out of all the cryptocurrencies is that it is non-divisible, that is –the smallest unit will always be One.
Qtum is another decentralized cryptocurrency that combines the best features of Bitcoin and Ethereum. The “Qtum protocol” is a hybrid fork of Bitcoin. The architecture system of Qtum shows an integration of the best parts of Bitcoin and Ethereum platforms into business-friendly blockchains.
Qtum is different from other virtual currencies as it is the first global Proof-of-stake smart contracts platform. Besides this, it aims to be a global “primary” smart contracts platform and is also working on Mobile development software.
Qtum is solving a lot of issues that Bitcoin and Ethereum have failed to resolve. Some of these issues involve the usage of Heavy CPUs for Proof-of-work, which leads to high transaction charges. Proof-of-stake does not require such heavy CPUs and is thus cheaper than Bitcoin and Ethereum. Other issues that Qtum addresses are the capabilities of different blockchain technologies.
Qtum is an innovative platform with a large potential reach of clients. It also gives the programmer a potential edge over its competitors as it decreases the learning obstacles of the programming languages.
Where Can You Store Your Cryptocurrency?
The best way to store your cryptocurrency securely is to own a wallet. If you seriously care about your money, you would definitely need a hardware wallet to transfer your Bitcoin or any other cryptocurrency to it.
There is also an option of a cold wallet or an offline wallet. People who are afraid of having a hardware wallet generally start with cold wallets. The simple reason behind it is that these wallets do not require internet access.
Now there are a variety of options available for the different types of wallets. Each one has its own unique feature to cater to your desire for wallets. Paper wallets, Desktop wallets( cold wallets), Hardware wallets are some of the best ways of keeping your cryptocurrencies safe. Some people store in the form of physical coins, which is usually not the most preferred way.
How to Buy Cryptocurrency?
When it comes to buying cryptocurrencies, there are numerous options available. Some options include Bitcoin ATMs, buying crypto-coins using gift cards, cryptocurrency exchange, trading via meeting in-person, etc.
The popularity of cryptocurrencies directly affects the available options for buying them. Popular cryptocurrencies mostly have a variety of options available. And for the less popular cryptocurrencies, these options get limited. In such cases, the option of face-to-face trading crypto-coins is always open.
In conclusion, I would like to say that cryptocurrency is an interesting concept that can digitalize transactions worldwide. It has certain good as well as bad sides to it. It can alter global finances completely. The blockchain technology of cryptocurrency is completely safe and secure, but the other components can get hacked by illegal means.
Cryptocurrency is not a new concept; it came into the picture way back; however, it got popularized in the meantime. It is not banned in certain countries; cryptocurrency exchanges still happens in the USA and China. Investing in cryptocurrency is like a gamble since its value goes up and down now and then.
In this article, we have also explained some of the popular cryptocurrencies that are in use today. With so many cryptocurrencies in the market, how can one choose (if any) which one to go for? Well, the best way is to look up for the market capitalization. Market capitalization shows the circulating supply of currency from around the world. And from there, one can easily check out the features that would be required for future transactions.
Considering the current growth, there’s going to be more cryptocurrencies to come in the upcoming years.