The future of cryptocurrency
What is cryptocurrency?
Cryptocurrency is a digital medium of exchange that can be used to buy goods and services. It is a collection of binary data that is used as legal tender. It is a decentralised currency. Every cryptocurrency has its own blockchain to keep the data of all transactions. It is not possible to reverse any transaction. When a transaction is completed it will be stored as data in a blockchain. Bitcoin, dogecoin, ethereum are some examples of cryptocurrencies.
It is a technology to store information and data in a decentralised manner. It means no involvement of central authority. Cryptocurrencies are decentralized; which means there is no central agency controlling cryptocurrency. This is because of blockchain. In a blockchain, the information is stored in the form of blocks. Each block has three main things:
- Data- information you store in your block. Like the name, amount etc.
- Hash- each block has its fingerprint known as a hash. It is a way to identify a block among other blocks.
- Hash of the previous blocks- this block stores the fingerprint of previous blocks. Basically, linked to all blocks.
It is impossible to tamper with the data in a blockchain. Once a block is defined and becomes a part of blockchain it cannot be altered.
Let’s see how many types of cryptocurrencies exist-
Bitcoin is the first cryptocurrency introduced by Satoshi Nakamoto in 2008. It uses cryptography to the transaction of data safely. Bitcoin is basically based on three main principles.
- Decentralized networks
- Demand and supply
It is based on an algorithm designed by an agency in the US. It is an easy way to send money over the internet. Miners play an important role in transactions. The miner’s job is to verify the transaction. Let’s take an example: if A has to transfer 2 bitcoins in B’s account the miner will verify that A has 2 bitcoins in their account or not. To complete the process miner has to solve a complicated equation that can be possible through a high quality of the computer. Once the equation is solved, other computers within the network confirm the transaction and it will be added to the chain. The main use of cryptocurrency in the present is an investment. People invest money by hoping for a higher return in future. It’s been like a store of value just like gold. Bitcoins are also known as digital gold.
Cryptocurrency is not a physical medium of exchange; it is not possible to buy snacks or groceries from nearby shops using bitcoin. But this might change in future as in some countries hotels have begun to accept bitcoin as a form of payment.
After the popularity of bitcoin many people brought up its disadvantages as the transaction time of bitcoin is high. After this people started making their own coins, known as Altcoins. Dogecoin was made as a joke. But how does it become popular?
Have you heard about Reddit? It is a website from where the growth of dogecoin is started.
Whenever someone likes a post or comment on Reddit people give some dogecoins as a tip. But using dogecoin as a tip started gaining popularity. The value of dogecoin increased rapidly. To buy a dogecoin is the same process as of other cryptocurrencies. Maybe in the future, the value of dogecoin could hit $1.21 by 2025. Only because of its circumstances, dogecoin has become popular nowadays. Investing is the higher risk, but there are equal chances of high return as well.
Cryptocurrency industry is increasing rapidly. It may be the future currency of the world as the level of technology is at a high peak. Investing in crypto is a good idea but one should have appropriate knowledge of the market. While you are investing you should be aware and be prepared for good and bad as the cryptocurrency value can unpredictably fall down.