Cryptocurrency is a digital asset used primarily as a means of transaction to secure financial transactions, control the creation of additional assets, and verify any asset transfers using strong cryptographic technology. It is also known as a form of digital currency or virtual currency. Unlike central banking systems, it is a decentralized system of control and financial transactions that operates through a block chain used mainly for financial transactions.
The first decentralized virtual currency, developed in 2009, is Bitcoin, known as a virtual currency, and operates independently without the help of a central bank or administrator. Since then, about 4,000 altcoins have been developed from different variants of Bitcoin. Bitcoin is considered a peer-to-peer electronic money system where users transact directly without intermediaries.
Blockchain is a data file consisting of multiple blocks that keeps records of all previous Bitcoin transactions as well as the creation of new ones. The normal average time between each block is about 10 minutes. The most common use of bitcoin is supported by external software called Bitcoin wallet. With the help of this software, you can easily store, receive and manage the transaction of Bitcoin units. To transact using Bitcoin, one must have an account in any of the Bitcoin exchanges around the world and must transfer fiat currency into that account. Thus, the account holder can make future transactions using these funds. Apart from Bitcoin, some of the other sources of cryptocurrency is oil, which is mainly used for oil and mineral reserves.
There are some pros and cons associated with using digital currency. The main advantages of using virtual currency are as follows:-
• Provides a quick clear coat:-
Bitcoin typically works using a ledger called the Blockchain, which records and tracks every transaction. Once a transaction is made and recorded in this ledger, it is considered static. These transactions can be further verified anytime in the future and hence in addition to this, it also ensures security and privacy in respect of all transactions done through a particular account.
• Fast processing and portable usage:-
Billions of dollars in bitcoins can easily be transferred from one place to another without any detection using a single memory device. In making any type of transaction, the involvement of a third party can be eliminated by using this Bitcoin technology. This will lead to easy and fast transaction without third party approval,
• Low transaction costs included:-
The transaction costs associated with exchanging these digital currencies are much smaller, making them more accessible than real currency to the world’s population. Therefore, the cost of any type of transaction done is much less, which turns out to be an advantageous feature for the population when they transact.
• Fights and eradicates poverty:-
Often the banking systems and financial institutions do not provide help or assistance, especially to the backward classes in the rural areas. Bitcoin serves as an alternative in such cases as it extends its stable financial services to anyone with internet access. It often serves as a support for the poor and downtrodden classes, who in most cases are not given a viable alternative.
As when a new or latest technology comes out, there are also some negative factors associated with its use which are as follows:
• Lack of knowledge and distrustful attitude of the population:-
Due to lack of knowledge about digital currency, people are more likely to become distrustful of its widespread use. Therefore, there are very few business systems that accept these sources of cryptocurrency, which limits the business systems that prefer to use the virtual currency in their daily transactions.
• Untraceable Transactions:-
Since transactions made with Bitcoin cannot be traced, it provides a place for criminal transactions. In such cases, drug dealers and honest individuals are the ones who use such virtual currency so that their illegal activities are not easily detected.
• Changeable and uncertain nature:-
Cryptocurrency is sometimes volatile and keeps changing frequently on a large scale. Sometimes people make a lot of money when the market rates of these virtual currencies skyrocket and sometimes they also face big losses when the price crashes.
Cryptocurrency is an innovative but amateur concept that can potentially disrupt the entire financial market. It is true that this digital currency grabbed the attention of the world in a short period of time. There are always pros and cons to any new technology that hits the market. To make the best use of it, both sides should be considered before making decisions.