A cryptocurrency is a medium of exchange that is , encrypted, decentralized and digital. There is no central authority to determine the value of cryptocurrency. Instead, the value of cryptocurrency is determined by its customers over the Internet. Cryptocurrency functions through the network , where a large number of computers are employed, which is why cryptocurrency is decentralized, and control of the currency is not confined to the hands of a government authority or a central authority.
Bitcoin was the first cryptocurrency, first outlined in principle by Satoshi Nakamoto in a 2008 paper titled Bitcoin: A Peer-to-Peer Electronic Cash System Nakamoto described the project as an electronic payment system based on cryptographic proof instead of trust.
That cryptographic proof comes in the form of transactions that are verified and recorded in a form of program called a blockchain. Although released in 2009, Bitcoin is still the most popular and valuable digital currency.
Bitcoin - A detailed analysis
Bitcoin is what everyone calls BTC for short. One of the characteristics of crypto currencies is that non physical existence or non physical accessibility.
In a short period of time, cryptocurrencies gained a lot of popularity and thus hit the digital market under different names. Bitcoins are one among them. It’s always a question as to the issuing authority behind Bitcoin. Like we have RBI for India We all know the authority or issuing body behind bank currencies of a particular nation Unlike cryptocurrencies like Bitcoin’s and other ones are not controlled directly by Government, private individual or other body of individuals. Thus the Anonymity of the issuing body forms another prominent feature.
Bitcoins can be stored as a digital currency as well as used as a medium of exchange for other goods. Another distinguishing feature is that we can transfer Bitcoin as easily as sending a message from one electronic device to another keeping the anonymity of the sender and receiver.
Bitcoin network controls the bitcoin. Bitcoin network comprises the common man who uses bitcoin, and anybody can become a part of it. To understand this network, we must understand the Bitcoin Public Ledger. All confirmed transactions from the start of Bitcoin’s creation are stored in the public ledger. This complete record of the transaction which is a sequence of records called blocks.
The primary advantage of cryptocurrency is that a third parties and intermediaries like banks, can be avoided if two people want to transact money with each other making it possible though the use of public and private keys. Since there are no third parties or inter-mediaries here, we can save processing fee and other charges over transactions.
The biggest disadvantage of this is that the identity of the parties involved in the transaction being unclear , so it is possible to take advantage of this opportunity and do a lot of illegal activities such as money laundering, tax evasion , drug peddling, smuggling, and procurement of guns. The reality that a computer crash can erase one’s digital fortune, or an act of a hacker can be considered as some other drawbacks of using cryptocurrencies.