A cryptocurrency is a digital asset used primarily as a transaction tool 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 control and financial transaction system that operates through a blockchain used mainly for financial transactions.
The first decentralized virtual currency to be 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 various variants of bitcoin. Bitcoin is considered an equal electronic money system in which users make transactions directly without any intermediate services.
A blockchain is a multi-block data file that stores 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 one can easily store, receive and manage the transactions of bitcoin units. To make transactions using bitcoin, one must have an account in any of the bitcoin exchanges around the world and must transfer the fiat currency to that account. In this way, 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 to using digital currency. The main advantages of using virtual currency are as follows:
• Provides a fast layer of transparency: –
Bitcoin usually works with a register called Blockchain, which records and monitors each transaction. Once a transaction is made and recorded in this book, it is considered static. These transactions can be further verified at any time in the future and therefore, in addition to this, it also ensures security and confidentiality in respect of all transactions made through a particular account.
• Fast processing and portable use: –
Billions of dollars in bitcoins can be easily transferred from one place to another without any detection using a single memory device. In any type of transaction, the involvement of a third party can be eliminated with the help of this bitcoin technology. This will result in an easy and fast transaction without any third party approval,
• Low transaction costs included: –
The transaction costs associated with exchanging these digital currencies are much less, making it more accessible than the real currency to people around the world. Therefore, the cost of any type of transaction is much lower, which proves to be a beneficial feature for the population when making transactions.
• Fights and eradicates poverty: –
Banking systems and financial institutions often do not provide assistance or assistance, especially to backward classes in rural areas. Bitcoin serves as an alternative in such cases when it expands its stable financial services to anyone with Internet access. It often serves as a support for the poor and oppressed classes, who in most cases are not given any viable alternative.
When a new or latest technology arrives, there are some negative factors associated with its use, namely:
• Lack of knowledge and distrustful approach of the population: –
Due to the lack of knowledge about the digital currency, people are more likely to distrust 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 virtual currency in their daily transactions.
• Untraceable transactions: –
Because bitcoin transactions are untraceable, this provides room for criminal transactions. In such cases, drug dealers and bona fide individuals are the ones who use such virtual currency in order not to easily reveal their illegal activities.
• Variable and uncertain nature: –
Cryptocurrency is sometimes volatile and continues to change 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 falls.
Cryptocurrency is an innovative but amateur concept that can potentially disrupt the entire financial market. It is true that this digital currency has attracted the world’s attention for a short period of time. There are always advantages and disadvantages to any new technology that comes on the market. To make the best use of it, one must consider both sides before making any decision.