What is crypto currency and How it Works?

Rate this post

What is crypto Currency?

Cryptocurrency is an encrypted, decentralized digital currency used to verify transactions on a distributed system with open source software between peers.

The transfer of funds operates on the internet, independently of central banking and governments.

Transactions are added to a public ledger – also known as the blockchain via nodes on the network with agreement achieved through a proof-of-work system referred to as mining.

Cryptocurrencies are a subset of alternative currencies or specifically, digital currencies.

The currency’s value relies on a delicate math equation that figures out how much of the currency can be created by using specialized computers and computer programs. In short, it’s virtual money that’s pretty much tamper-proof because of math and the internet.

Like stocks and other physical currencies, cryptocurrencies are based on the law of supply and demand. If demand outstrips supply, the value of a cryptocurrency increases, and vice versa. New increments of the currency are constantly created, but if demand outpaces the newly created currency, the value of that currency will increase.

How to Buy Crypto Currency?

You can buy cryptocurrencies through exchanges, or businesses that specialize in cryptocurrencies. These exchanges also offer services like wallets, which hold your total cryptocurrency stake in a cloud-based bank. These exchanges often take a fee in exchange for use of their services, though the fee is often small. Exchanges also place limits on your ability to buy and sell certain amounts of currency in a day, month, or year to avoid illegal activities.

Coinbase is the world’s most popular digital asset exchange company headquartered San Francisco, California. It operates exchanges of Bitcoin, Ethereum, Litecoin, and other digital assets with fiat currencies in 32 countries, and bitcoin transactions and storage in 190 worldwide.

Pros and Cons of Crypto Currency:

Pros:

  • Built-in Scarcity May Support Value.
  • Loosening of Government Currency Monopolies.
  • Self-Interested, Self-Policing Communities.
  • Robust Privacy Protections.
  • Harder for Governments to Exact Financial Retribution.
  • Fewer Barriers and Costs to International Transactions.

Cons:

  • Lack of Regulation Facilitates Black Market Activity.
  • Potential for Tax Evasion in Some Jurisdictions.
  • For High Price Volatility and Manipulation.
  • Often Can’t Be Exchanged for Fiat Currency.
  • Limited to No Facility for Chargebacks or Refunds.

Examples of Crypto Currency:

  1. Bitcoin
  2. Litecoin
  3. Ripple
  4. Ethereum
  5. Dogecoin
  6. Coinye

Conclusion:

Cryptocurrency is an exciting concept with the power to fundamentally alter global finance for the better. But while it’s based on sound, democratic principles, cryptocurrency remains a technological and practical work in progress. For the foreseeable future, nation-states’ near-monopoly on currency production and monetary policy appears secure.