With cryptocurrencies currently on the rise, many people are gaining interest in the issue as they try to understand how they can get the most out of these ventures. This guide will provide you with some essential information on what entails a cryptocurrency and the benefits that accrue from their use.
Overview
A cryptocurrency is a virtual currency which makes use of cryptography in a bid to ensure the security of the asset. Thanks to the use of cryptography, it is challenging for people to counterfeit this kind of currency and this gives users confidence in their trades. Another thing that you need to note about these currencies is that they are organic. This term refers to the fact that no central authority governs the production of such money and as such, users can rest assured that the government cannot come in to alter the trades. As such, you can see that these currencies are entirely different from the conventional monies that are in existence.
How it all came together
Many people have heard of Bitcoin, and in most cases, it is the cryptocurrency that comes to mind when people delve into virtual currencies. This currency came onto the scene back in 2009 under a developer by the pseudonym Satoshi Nakamoto, which could either stand for an individual or a group. This currency quickly piqued people’s interest, and by the year 2018, there were seventeen million bitcoins in the market, valued at more than $140 billion. People, having seen the success of Bitcoin, sought ways in which to get a share of the market and soon, other virtual currencies such as PPCoin cropped up.
Workings
Blockchain technology in place ensures that all transactions taking place are available on a ledger to which users can refer when they wish to transfer funds. This online ledger is available to all users on such platforms and is not prone to hacking, thus ensuring open and secure transactions in the forums. It is also not possible to forge transfer histories because each new block to the ledger must first go through a verification process before it appears on the platform. This technology has appealed to many people who see it as fit for use in other areas such as crowdfunding and online voting where alterations are common.
The ups and downs
For a long time, people have complained about the long periods taken in processing funds using conventional means as well as the high costs that come with the process. With the coming of virtual currencies, transactions between two parties not only became simpler but it is also safer as compared to traditional means. The use of keys ensures that the processes cannot get altered and this provides for the security of the funds in question. The fees incurred are very minimal if any and this allows users to avoid parting with considerable chunks of their monies when processing funds.
The downside to these virtual currencies is that lack of a backup can lead to the wiping out of balances if a computer were to crash. Also, the pricing of these currencies varies depending on the supply and demand forces on the market and as such, price fluctuations are commonplace. Another issue with these currencies is that they are not subject to regulation such that users can use the anonymity feature for illegal transactions such as money laundering and tax evasion. They can also get hacked, and there have been a few incidences on the same.
However, looking at the developments made over the years, it is evident that these currencies are a way to facilitate exchanges between people in a timely and economical manner. They are indeed a way to preserve value.