As the time changes, societal norms are changing along with it. Living in the digital era, technology has had an enormous impact on our society. As the use of technology has rapidly expanded its influence over modern societies in the past decade, the practice of digitalization has become increasingly prevalent. While the concept of credit cards was first launched in the mid-1900s, recent technological advances in the payment sector have caused the use of physical cash to decline drastically. While digital payment systems for flat currency continue to surge, the emergence of a new electronic means of exchange, cryptocurrency, has taken the financial world by storm.
What is a Cryptocurrency?
A cryptocurrency is a decentralised payment system, which basically lets people send currency to each other over the web without the need for a trusted third party such as a bank or financial institution. Cryptocurrencies gained their name and fame for one main feature i.e. they are not issued by a central authority and are free from the shackles of traditional banks.
It is a currency associated with the internet that uses cryptography, the process of converting legible information into an almost uncrackable code, to track purchases and transfers. Cryptography was born out of the need for secure communication in the Second World War. It has evolved in the digital era with elements of mathematical theory and computer science to become a way to secure communications, information and money online. Cryptography is used to control transactions, increase the supply, and prevent fraud.
The first cryptocurrency was Bitcoin, which was created in 2009 and is still the best known. There has been a proliferation of cryptocurrencies in the past decade and there are now more than 1000 available on the internet. The cryptocurrency model boasts being a new financial system designed by the people, for the people.
How do cryptocurrency work?
Cryptocurrency uses decentralised technology to let users make secure payments and store money without the need to use their name or go through a bank. They run on a distributed public ledger called blockchain, which is a record of all transactions updated and held by currency holders.
To create cryptocurrencies, users must generate blocks on the network. Each block is created cryptographically by harnessing users' computer power and is then added to the blockchain, letting users earn by keeping the network running.
In order to generate cryptocurrency coins, people or companies called miners, resolve mathematical problems by using highly advanced computers and specific software.
Why would you use a cryptocurrency?
Better Security: Unlike traditional payments, like cash and credit cards, cryptocurrencies are digital and encrypted; you cannot be ripped off in a transaction like you can be with legacy payment systems and it is much harder to steal cryptocurrency compared to a wallet full cash.
Identity Theft: Credit cards operate on a “pull” basis, where the store initiates the payment and pulls the designated amount from your account. Cryptocurrency use a “push” mechanism that allows the cryptocurrency holder to send exactly what he or she wants to the merchant or recipient with no further information.
No Middleman: Another great benefit of using cryptocurrency, especially when purchasing real property, is that digital currency can help eliminate expensive brokers, lawyers, and other typical “middlemen” who inevitably raise the costs of already expensive transactions.
Easily Accessible: There are approximately 2.2 billion individuals with access to the Internet or mobile phones who don’t currently have access to traditional exchange, these people are primed for the Cryptocurrency market. As more people, including billions of people in the developing world, increasingly use mobile devices linked to the Internet to conduct financial transactions, cryptocurrency is truly going to come into its own.
Recognition at universal level: Since cryptocurrency is not bound by the exchange rates, interest rates, transactions charges or other charges of any country; therefore it can be used at an international level without experiencing any problems. Cryptocurrency operates at the universal level and hence makes transactions quite easy.
Lower Fees: There aren’t usually transaction fees for cryptocurrency exchanges because the miners are compensated by the network.
What are the most common cryptocurrencies?
Bitcoin: Bitcoin is the first and most popular cryptocurrency, invented in 2009 by Japanese software developer Satoshi Nakamoto (on hypothesis). Bitcoin has the biggest market cap, overshadowing all other cryptocurrencies. Since Bitcoin has such a big reputation, all other cryptocurrencies are referred to as ‘altcoins’ – alternative coins because they are alternatives to Bitcoin.
Ethereum: While still at its nascent stage, this currency launched in 2015 might be the Cryptocurrency of the future. Ethereum is a decentralized computing platform that features smart contract functionality. It offers the Ethereum Virtual Machine (EVM), a decentralized virtual machine that executes peer-to-peer contracts using a cryptocurrency known as ether.
Bitcoin Cash: Bitcoin Cash is the spin-off of bitcoin that was created when bitcoin split on August 2017, after bitcoin owners failed to agree on the best approach to grow the cryptocurrency’s global presence.
Ripple: Ripple’s distributed financial technology allows for banks around the world to directly transact with each other.
Litecoin: Litecoin is a peer-to-peer cryptocurrency released under the MIT/X11 license. The currency is Inspired by and technically almost identical to bitcoin. Litecoin formation and transfer is based on an open source protocol.
Dash: Dash, formally called Darkcoin is a more secretive form of Bitcoin. Launched in 2014, Dash provides more privacy as it operates on a distributed master code network that makes dealings nearly untraceable.
The Price and Market cap as on 12th Oct 2017 of top common crypto currencies are given below
Legality of Cryptocurrency
Cryptocurrency has various legal aspects to consider depending on the country. Some countries class Bitcoin and other virtual currency as money and legal, some class it as an asset and legal, some class it as neither illegal nor legal, with no legal frameworks in place.
China Central Bank banned the handling of bitcoins by financial institutions. In Russia, though cryptocurrencies are legal, it is illegal to actually purchase goods with any currency other than the Russian rubble. On March 25, 2014, the United States Internal Revenue Service (IRS) ruled that bitcoin will be treated as property for tax purposes as opposed to currency. This means bitcoin will be subject to capital gains tax. In India also cryptocurrency is subject to capital gain, as it treated as an investment/ asset.
How to Make Money from Cryptocurrency Trading?
Crypto Currency trading
Cryptocurrency Trading is the Forex (Foreign Exchange) of cryptocurrencies. This means, you are able to trade different bitcoin and altcoin. Cryptocurrency Trading is an alternative way to get involved in the Crypto-World!
Trading cryptocurrencies at an exchange is much like trading forex. You’re basically looking to profit from the movement of one currency against another. Most of the time, you’ll be trading bitcoin against the USD or bitcoin against another cryptocurrency.
There are many cryptocurrency exchanges available on internet. Each one is having its own standards and level of quality. Many of them provide customer support so that people can contact them if anything goes wrong while trading or after trade. Choose the one which is having the most transparent set of standards.
Summary on Cryptocurrency trading
Trading cryptocurrencies is highly risky due to high volatility of prices of most coins. Many coins quadruple their value in less than a week or vice versa. Constantly profitable trading is not impossible, yet it requires continuous studying of technical charts and researching through the technologies behind various cryptos to determine the most promising ones. Though you always need to be cautious, because there are lots of fake coins, pump & dumps, schemes and ponzis.
Cryptocurrency can be the Future of Money
Cryptocurrency is an interesting phenomenon to watch and it may open up new consumer markets for businesses. One thing seems clear, without cryptocurrencies the new and more vibrant and trusted economy would be incomplete. Whereas, as more and more civil consciousness of the importance of the new ecosystem is built, the more pressure will there be on governments around the globe to consider cryptocurrencies and bitcoins in particular, more seriously. A point will come when there will be those who dwell in the new reality and those that are left out.