Cryptocurrency – The beginning of a New Era
“Cryptocurrency is such a powerful concept that it can almost overturn governments” – Charles Lee, Creator of Litecoin
Cryptocurrency is a digital currency that can be exchanged for goods and services online. It uses an online ledger with strong cryptography for online transactions. It works on blockchain technology. Blockchain is a decentralised technology spread across many computers that manage and record transactions. The key takeaway here is the security factor.
Never has the world witnessed such a surge in digital assets as it is now. This is a move away from our innate need to possess tangible assets. A cryptocurrency is a digital asset that can be used as a medium of exchange. Today, this is the most debated topic between the haves and have nots of cryptocurrency. This relies heavily on the greater fool theory of investment. The fact that there will be a bigger fool willing to pay higher money than one did for the investment.
Fundamentals of cryptocurrency
Cryptocurrencies work on the principle of the use of public keys. This involves very less transaction fee and slowly is working its way to make traditional banking redundant. Cryptocurrency works on the blockchain model which simply put is a chain of blocks where digital information in the block is stored in a public database viz the chain.
1. Blocks show information about the date, time and amount
2. Digital signatures identify who carried out the transaction
3. Blocks differ from one another by the use of unique code called “hash”
Why use cryptocurrency?
1. As a mode of payment – Money can be sent at a low cost and high-speed using cryptocurrency. It is also being touted as a viable mode of payment for many in-app purchases.
2. As an Investment / Wealth management – It is seen as a lucrative investment option. As there is a surge in its value since its introduction, it is seen as a capital appreciation mechanism. But it can witness price fluctuations due to popularity and fad change. They are also great opportunities to manage wealth without boundaries.
3. Ethical business practices – Blockchain allows transparency in transactions and helps to track and record transactions.
4. Going green – Transfer of environmental credits help reduce carbon footprint.
5. Decorrupting charities – Blockchain can ensure that fund leaks are plugged and can ensure security in cash distribution.
6. Travel – A large number of transactions such as flight, hotel, car rentals, cruise are enabled by cryptocurrency and hence make payment seamless.
7. Education – Many educational institutions are also encouraging cryptocurrencies as a means of payment.
8. Fundraising – The venture capitalist funding route is being abandoned for a more agile and revolutionary method in the fund-raising process.
Thanks to its rising popularity, Elon Musk is tinkering with the idea of allowing cryptocurrencies to be used to buy Tesla cars. As anonymous as the identity of its founder, cryptocurrency is here to stay contrary to some naysayers.
If you don’t believe it or don’t get it, I don’t have the time to try to convince you, sorry – Satoshi Nakamoto
Authors – Benila Jacob, Anthony Preetham