Here i would try to explain what crypto currency is all about in the most simplified way possible.
“Bitcoin is exciting because it shows how cheap it can be. Bitcoin is better than currency in that you don’t have to be physically in the same place and, of course, for large transactions, currency can get pretty inconvenient.”- Bill Gates
A crypto currency is a kind of Digital/Virtual/or we can say an alternative currency which is designed to work as a medium of exchange that uses several methods to secure financial transactions, control creation of additional units and verify the transfer of assets.Cryptocurrencies were designed as a unit of exchange and as a place to store assets without relying on a central bank.
The main technology behind most of the crypto currencies is BlockChain, the most famous among these is the BitCoin ,which was first released as open-source software in 2009, is generally considered the first decentralized cryptocurrency. If we talk about present, there are more than 4,000 altcoin (Alternative Coin) have been launched in market.
If we go by the definations, According to Jan Lansky, a cryptocurrency is a system that meets six conditions:
1)The system does not require a central authority, distributed achieve consensus on its state.
2)The system keeps an overview of cryptocurrency units and their ownership.
3)The system defines whether new cryptocurrency units can be created. If new cryptocurrency units can be created, the system defines the circumstances of their origin and how to determine the ownership of these new units.
4)Ownership of cryptocurrency units can be proved exclusively cryptographically.
5)The system allows transactions to be performed in which ownership of the cryptographic units is changed. A transaction statement can only be issued by an entity proving the current ownership of these units.
6)If two different instructions for changing the ownership of the same cryptographic units are simultaneously entered, the system performs at most one of them.
The underlying technical system upon which decentralized cryptocurrencies are based was created by the group or individual known as Satoshi Nakamoto.
Most cryptocurrencies are designed to gradually decrease production of that currency, placing a cap on the total amount of that currency that will ever be in circulation which is different in the case of ordinary currencies held by the Financial institutions. In case of decentralized cryptocurrency, companies or governments cannot produce new units, and have not so far provided backing for other firms, banks or corporate entities which hold asset value measured in it.
Cryptocurrency transactions happen directly between individuals instead of through a bank. Every time a person makes a transaction using a cryptocurrency — for example, using funds stored in his or her crypto wallet to send bitcoin to someone else — the transaction is recorded on a digital ledger called a blockchain. Every cryptocurrency has its own blockchain, and computers doing complex math in a large network maintain it.
Once users make a specific number of transactions using a cryptocurrency, the computers group these transactions into a “block.” In order to send a block, adding transactions to the blockchain and winning a monetary reward, a computer has to solve a complex math problem called a cryptographic function.
The following features are the main driver of cryptocurrency price, but not limited to these.
Limited Supply and supply/demand.
Energy put in in the form of electricity to secure the blockchain.
Blockchain difficulty level.
The utility of the currency, and how easy it is to use and store.
Perceptions on its value by the public.
Price of Bitcoin.
Media.
Investors.
Scams.
Market dilution.
Innovation.
Confidence in traditional systems.
Legal/Governmental issues.
Crypto currencies have been made legal in many of the countries however it's not a legal tender yet in most of those countries too(you can’t pay your taxes in Bitcoin, it is considered investment property).
I would like to conclude it here only , as this post was meant to give a basic understanding about the crypto currencies, if you guys want me to give some detailed knowledge about it, do let me know.
Thanks. :)
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