What is a cryptocurrency? Most of us have this question in our mind. The easiest way of explanation is that it is a digital asset designed to work as a medium of exchange. The cryptocurrency is also called as virtual currencies. There are various cryptocurrencies like Bitcoin, Ripple, Litecoin, Zcash, Monero etc. The most famous among these currencies are Bitcoin, It is created by Satoshi Nakamoto in 2009. This is the first decentralized cryptocurrency, since then many other cryptocurrencies have been created. In centralized economic and banking system, the government or corporate boards control the supply of currencies by printing units of money. But in decentralized cryptocurrencies governments or corporate cannot produce new units.
The decentralized cryptocurrencies are based on a technical system created by a group or individual such as Satoshi Nakamoto. The cryptocurrencies are designed to gradually decrease production which leads to increase in amount of a coin in circulation. It is difficult to seize the cryptocurrencies by the law and enforcement because its not kept on hand. Let us take a look on few interesting facts about cryptocurrencies.
The validity of a crypto currency is determined by a block chain. A block chain is a growing list of records which are called blocks and linked with cryptography. Each block contains a link to its previous block, a time stamp and transaction details. This is an open ledger which is capable of recording transactions between two parties efficiently. For use of this ledger a blockchain is managed by peer to peer network sticking to protocol for new blocks.
In cryptocurrency network mining seems to be validation of transactions. The successful efforts made by miners are rewarded by a cryptocurrency coin this reward decreases the transaction fees by creating a complementary incentive. The process of generating hashes which validates the transaction can be increased by the help of specialized machines like ASICs. However with more people getting into the world of cryptocurrency, generating hashes for validation has become more complex over these years.
A variety of timestamping methods are used in cryptocurrencies to avoid the need of third party to timestamp transactions which is added to the blockchain ledger.
Cryptocurrency wallets stores the public and private key which is used to spend or receive the cryptocurrency. With the help of public key the user can send the cryptocurrency to others wallet. With private key the user can write in public ledger, spending the cryptocurrency.
The transaction fees mainly depends on the demand from the currency holder. The currency holder can choose specific amount provided to them by the cryptocurrency exchange. The cryptocurrency exchange provides the currency holders a set of amounts with its processing time duration.
The cryptocurrency wallet is not tied to people since it is tied with the key or addresses the cryptocurrency holders are not identifiable. But all the transactions are available in blockchain. Still cryptocurrency exchanges are often required by law to collect the information of the users. Yet few cryptocurrencies like Zerocoin and Zcash claims they allow true anonymity to its users.
The legality of cryptocurrencies varies substantially from country to country. While some countries allowed the trade and use of cryptocurrencies others have banned it. In the countries like India and china government doesn’t support the use and trade of cryptocurrencies. But in Russia though cryptocurrencies are legal, it is illegal to use any other cryptocurrency other than Russian Ruble.
In case of fraud or theft
GBL, a chinese bitcoin trading platform suddenly shut down on october 2013. The users were unable to login to their account, lost upto 5 million dollar worth of bitcoins. There are many cases of lost or theft with related to cryptocurrencies. As it is decentralized platform government will not be held responsible to the loss or theft of users. It is totally upto the users whether they want to risk their money on cryptocurrency or not. In simple terms “enter the world of cryptocurrencies at your own risk”.