Cryptocurrency| Bitcoin: Cryptocurrency the most popular one is Bitcoin is getting popularity day by day. These are digital currency assets that are attracting many people around the globe. In this Topic "Cryptocurrency and Bitcoin. Simple Best Easiest Way." we are going to discuss everything about Cryptocurrency and bitcoin-like Blockchain, Crypto working, Investing in Crypto, pros/cons, the History/future of Cryptocurrency, and many more. So, let's Start:
What Is Cryptocurrency & Bitcoin?
A
cryptocurrency is a medium of exchange, such as a Dollar, Pound, Euro, or Rupee
but in the digital format using blockchain/encryption techniques to both controls
the creation of monetary units and verify the exchange of money. You can say
this is your currency in digital form. And Bitcoin is a cryptocurrency that has
the largest market capitalization in cryptocurrencies. Bitcoin is not the same as a cryptocurrency
but, it is a cryptocurrency itself that is the most popular.
How is Cryptocurrency Started?
Around 14 years ago, on 31st October 2008, a person named Satoshi Nakamoto published a paper on the Internet. Satoshi's main motive was clear from the first line of the paper a version of electronic cash would allow payments to be sent directly from one party to another party without going through a financial institution. Cryptocurrency is a digital asset over which central banks or financial institutions have no control or regulation, for instance, the UK Pound is controlled by the central bank of the UK Bank of England. The Indian Rupee is controlled by the Central bank RBI, But there is no central bank or any financial institution that controls the bitcoins/cryptocurrencies. Back then, cryptocurrency was merely an idea of that person but now, there is trading worth Millions and billions on its crypto exchange just like shares are traded on the normal stock markets. To understand Satoshi's view and the context of cryptocurrency, we will have to understand some concepts of our economic history. Our financial systems are based on trust. The currency notes and coins have value in our society because they are guaranteed by our government and the central bank. Take a look at any note in your wallet. It has your central bank stamp guaranteeing its authenticity. There is a small, but interesting story in this regard, After the Second World War, America became the most powerful country in the world and the rest of the countries had to align their currency with the US dollar. And what actually was the US dollar aligned with/guaranteed by? A reserve of gold. The actual value is that of gold or silver. But it is not practical to carry gold or silver around in your pocket. The currency notes were printed for convenience. But the US did away with this gold standard rule back in 1971. After that, the central banks of the rest of the countries could print their notes as per their needs, But what do cryptocurrencies and Bitcoin have to do with this? It helps you to know how powerful the government and the banks- especially, the central banks of the country are as far as monetary policy is concerned. The fact of the matter is that when you deposit your money in the banks, you give the banks permission to do whatever they want with that money, in one sense Making use of these deposits, the banks give loans to companies and individuals and make profits and sometimes loses your money too. This is what fetches returns, that is, interest on the money that you have deposited Very recently, we have seen that these banks use these savings and deposits in a very irresponsible manner It happens quite often that banks give loans to big industrialists without performing adequate checks and then these loans become bad debts/NPAs. And who becomes the victim in such cases? Depositors like us. Do you now understand the original idea/vision of Satoshi? Satoshi imagined Bitcoin as an alternate financial system that would be based on software technology and would be outside the control of third parties. You might be able to recall the Global Economic Meltdown of 2008 Mega investment bankers like the Lehman brothers had become bankrupt. Cryptocurrencies were born right after this scenario; Bitcoin was the first to arrive. And then many other cryptocurrencies surfaced- Ethereum, Litecoin, and Ripple In fact, at the beginning of this year, more than 2000 cryptocurrencies were available on the internet. You can too invest in Cryptocurrencies to gain profit if you have the knowledge of it.
What is a Blockchain?
Blockchain
is a technique to store information. To store the data in a decentralized
manner. Decentralized means that there will be no central authority to control
the entire data and information. Take RBI (Central Bank of India) for example.
Our Indian rupees, this note of ₹500, is printed by the RBI. RBI guarantees
that its value is ₹500. Neither ₹501 nor ₹502. It's even written on the note
that RBI guarantees it. So, RBI is a central authority controlling all the
Indian rupee notes around the world. RBI can change the value of the notes if
it wants to. Can increase the note production or decrease it. But on the other
hand, currencies like Bitcoin, are decentralized. There are no central agencies
or authorities controlling Bitcoin. It is possible because Bitcoin is based on
Blockchain. And Blockchain is the technology that makes Bitcoin decentralized.
There can be many ways to store information. Writing down something on paper is
a way to store information. Writing something on an excel file on the computer
is a way to store information. On an excel file, your information is structured
in the form of a table. You know the tables. Similarly, in a Blockchain, the
information is structured in the form of blocks. Each block is made up of three
main things. First, any data or information you store in the block. Second,
each block has its fingerprint known as Hash. This is the way to uniquely
identify a block among other blocks. Every block has its fingerprint. And
third, each of these blocks stores the fingerprint of the block before it. This
is a Blockchain. This block will have its fingerprint and the block behind it.
And thirdly, any information you put into it will be stored here. This is how
all the blocks are linked with each other. And the most unique thing about this
is that if you want to change the data in any block, if you try to tamper with
the data, then the fingerprint, or the hash, of the block will change. And if
the hash of one block changes, the hash of the next block will also change. And
the next and eventually the entire blockchain will be destroyed. For this
reason, it is next to impossible to alter or tamper with the data in a
blockchain. Because once a block is defined and becomes a part of the
blockchain It cannot be altered after that. The second major reason for
Blockchains being secure is Decentralisation. You will not find a blockchain
stored in only one computer. Blockchains are stored in a network of computers.
All the computers around the world belonging to the participants of the
blockchain will have one copy of this blockchain. Instead of one central
authority, it is managed and run by a network of computers collectively. The
people who are connected to the blockchain through their computers and those
who allow the blockchain to run on their computers are known as Nodes. Some
Nodes among them are Minors. Whenever new data is added to the blockchain, it's
the work of the Miners to verify it. Whether the person adding the data has
done so properly or not. Or whether it is an attempt at tampering. All the
Miners verify and record this. Any computer connected to this network can see
the data added to the blockchain. There is no need for any third party. No need
for any Central Authority. You too can connect your computer to the network and
verify this.
How does Cryptocurrency work?
Truly, to understand this, one needs to know advanced mathematics and computer science- which I don't have but if you want to start investment or trading, then basic knowledge is sufficient. Let us take the example of Bitcoins There is one public account in digital form, of all the bitcoin transactions- this is called a 'ledger' A copy of this ledger exists on all the systems that are a part of the Bitcoin network Those that run this system are called 'Miners'. This process is called “Mining”. The job of the miners is to verify transactions Say, A has to transfer 2 Bitcoins to B's account, and the Miners will have to confirm whether A does have 2 Bitcoins in his account or not. To complete the transaction, miners will have to solve a complicated math equation You might have studied variables back in your school, every Bitcoin transaction has a unique variable, and the job of the miners is to calculate it. It's not that they sit with a pen or paper to solve these equations, all these calculations are carried out on the computers automatically because they are extremely complicated and their combinations run in millions which is why these miners require computers with very complex and high processing power. Once this equation is solved, the other computers within the network confirm it and this transaction is added to the chain. A block of transactions gets created. And hence, the technology is called 'block chain' And what do miners get in exchange for this? They get the most valuable thing- Bitcoins! /Cryptocurrency. This system is called 'Proof of work'. The miners have to prove the computation work they do to get awarded the Bitcoins or any other crypto in return. This is how Cryptocurrency works.
Stablecoins:
These are
the digital currencies whose value is pegged/backed by a fiat currency (like Dollar,
Euro Rupee, etc.) these have an intrinsic value. And these become easier to
understand considering the underlying reserve asset.
How to buy cryptocurrency?
There are two
ways to buy it.
The first: To
buy it from someone just like trading the shares. You can buy it online using
many Crypto apps or sites available for trading crypto. Buying it from someone happens
further in two ways like an exchange facilitated transaction (Coin DCX, etc)
these are the exchange platforms just like share market exchanges. And 2nd
way is Peer-to-peer transactions (Person to person).
The 2nd:
You can mine new crypto coins as I have discussed above in the “Mining Process.”
And there is
another question popping out very frequently and that is: How to buy the right
cryptocurrency? Well, the answer to this question is very simple you have to learn
about this market first, understand how this works always be in touch with the news.
Just like the share market before you buy any share you read about it check its
performance etc. same follows for crypto on a very large uncontrolled scale.
Various Cryptocurrencies:
Bitcoin (BTC){largest}
then Ethereum (ETH) {2nd Largest}, Solana (SOL), Cardano (ADA),
Polkadot (DOT), Bitcoin Cash(BCH), Litecoin(LTC) etc.
Advantages/Positives of Cryptocurrency:
It has
become the very easiest mode of transaction. This will save time and you can
send the big amounts in no time from one person to another. Safer and more secure
as there is blockchain which is very tough to hack. This led to the invention
of new tech as this is growing day by day. If you have the right knowledge then
you can make the money and profit too.
Disadvantages/Negatives of Cryptocurrency:
The cryptocurrency has some negative points as well that are mainly related to money laundering and security. On the dark web the internet, the people had started accepting payment in Bitcoins for buying weapons and drugs. It became a very difficult job for law enforcement agencies to track such transactions because they were outside the traditional financial system. Issues related to hacking also surfaced. Another reason is that anyone can come up with a cryptocurrency. This is why, a lot of bogus and fraudulent companies took money from the public with a promise stating that once trading started in that particular currency, the value of their money would double/triple and they claimed that the money invested would double/triple. So, everything has positives and negatives too these are negatives of crypto.
Picking Good Cryptocurrency to invest in:
Picking up good crypto is a challenge but these 5 steps can
help you to pick good crypto that you can invest in or check these 5 steps
before you invest in any of the cryptocurrencies. But always do your research
before investing in any cryptocurrency.
Read the white paper:
Read the white paper of the coin you're about to invest in. Every single coin out there has a white paper that explains what they're aiming to do and how and when they plan to execute it. You need to check out the problem they set out to solve and the solution they have come up with. The team behind the product in their roadmap to see in which states they are at the moment. All those are the basics that you need to know before you invest in any cryptocurrency rule.Market Capitalization:
Check the circulating supply of the coin and its price or in other words the cryptocurrencies market capitalization. Be careful with your calculations because some coins have partially circulated coins and not the full amount is tradable, which can affect the future price of the coin since more coins will hit the market over time. Also, the current price is an indicator of a perceived value but not much else the price should never be deciding factor behind the investment the technical and future potential are the driving factors. Market Capitalization can also represent an inflated price if you see a coin with low daily volume but high market capitalization, you're most likely seeing a manipulation of that coin’s price also named “pump-and-dump”.Trading Volume:
Check the liquidity and the folder checks the trading volume of the coin in the last 24 hours. The higher 24-hour volume reflects a more established coin with a solid base at least one function in exchange and perceived value by the trading community. Try to choose a coin with at least ten million dollars in trading volume, it shows that the coin has already been traded and there's a certain percentage of the network that believes in that coin. There are success stories of investors buying a coin for a few cents with an incredibly low trading volume but these are rare incidents don't be misled. You have more chances of success by sticking to averages instead of chasing miracle trades. You also have to watch out for the so-called “pump and dump” as I mentioned before. They are set up by developers who buy the currency in a large quantity drive the price up to and sell as soon as the currency reaches a peak eventually dropping the price significantly.Developers Activity:
You must check the developers’ activity. The truth is anyone who knows how to code can design their cryptocurrency and that unfortunately comes with a lot of scams. The majority of successful or promising coins are announced on forums in our public software repository such as GitHub. If a developer is releasing a new crypto coin there should be a history behind that person. Nobody who brands new to the network will join with a new coin announcement come up with a successful idea behind cryptocurrency takes time. So do check the developer’s activity before investing in his cryptocurrency.
Social Media Presence:
Check the social presence of the cryptocurrency. It is extremely important that the cryptic ones you are looking to invest for the long or short term. To have a good base of supporters look at the social media but not get fooled.Future of Cryptocurrency:
It is very
hard to predict the future of Cryptocurrencies as the governments of different
countries have different approaches toward it. From the disadvantages mentioned
above in the topic, we can see what kind of problems can be there. But recently
there is one South American Country that had made Bitcoin legal tender and that
is El-Salvador. This all started in 2008 with bitcoin which is the largest
market cap holder till now and can be seen as a trendsetter for
cryptocurrencies. You can analyze the crypto market by seeing its growth. Recently
Bitcoin saw its peak that no one has ever expected. It is very volatile in
nature and can change anytime. You can study the bitcoin from its starting
graph till now what are the changes in it from that time till now and can
predict the future accordingly. A large number of people are excited about the growth
and predicted its success very high. But according to experts only invest that
much which you can afford to lose in the crypto because of its volatile nature
and you never know what’s going to happen. So, invest carefully if you seeking
profits in crypto.
So that's all about Cryptocurrency and Bitcoin in this topic "Cryptocurrency and Bitcoin. Simple Best Easiest Way.". I hope this has given you some clarity and helped in learn something new if you like this and found it informational then don't forget to share it.
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