Cryptocurrencies are digital currencies secured by cryptographic systems. The Cryptography system helps to make the crypto safe to use without the fear of counterfeiting or double-spend.
Highlights
- Cryptocurrency is a digital currency.
- It is not owned by any public or private entity.
- Cryptocurrency is being accepted in more countries as time passes.
- It is a safer way of transaction.
Cryptocurrency
A cryptocurrency is a digital currency which we use for monetary transactions. It is secured by cryptography blockchain, which makes it impossible to counterfeit or double-spend.
A cryptocurrency is a form of digital assets distributed across large numbers of computers through a network.
Cryptocurrency is a decentralised network based on blockchain technology which allows them to exist outside the control of government interruption.
Cryptocurrency can be mined and also can be purchased from cryptocurrency exchanges. In most places, cryptocurrency cannot be used for retail purchases. Even cryptocurrency like Bitcoin which is very popular can be hardly used for retail transactions.
Many cryptocurrencies are based on a decentralised blockchain network. So, what is blockchain? Blockchain is a set of connected blocks or an online ledger. Each block or ledger contains a set number of transaction that needs to be verified. So, it is almost impossible to forge any transactions.
Blockchain is a technology which is used can serve many industries like supply chains and processes like crowdfunding. JP Morgan Chase & co. are testing its use of it to lower transaction costs.
Some of the most popular cryptocurrencies are Bitcoin, Ethereum and many more.
Are cryptocurrencies legal?
As cryptocurrencies are not back by public or private authorities, it is difficult to determine if are legal or not. Due to cryptocurrencies’ functionality outside the financial infrastructure, that doesn’t help its case to be legal.
El Salvador was the only country in the world as of December 2021, to have allowed Bitcoin as a legal tender for monetary transactions.
China has fully banned cryptocurrency use and also it is mining in the country. India is still in between but it is reported that they will formulate a framework for cryptocurrency.
In European Union, cryptocurrencies are fully legal to use and mine. In June 2021, they released regulations that set safeguard financial services using cryptocurrencies.
Advantages of cryptocurrencies
- Cryptocurrencies formed a new way to use and make money for the country’s economy.
- Cryptocurrency doesn’t depend on a single large bank or monetary institution so the possibility of crises doesn’t happen much.
- Cryptocurrency makes it easier to make transactions between two parties.
- Investment in cryptocurrency can be beneficial in long run.
- Cryptocurrency makes it easier to streamline the money transaction without the need for a third party as the safeguard.
Disadvantages of cryptocurrencies
- Though it is said that crypto transactions can be traced but it leaves a digital trail which can be tracked.
- Cryptocurrency is a popular tool for the criminal to transfer funds as it is difficult to trace the transactions.
- Cryptocurrency is meant to be decentralised but some report by MIT student shows that only 11,000 investors own 45% of Bitcoin.
- Cryptocurrency can be mined by anyone who has an internet connection but it’s an expensive and time-consuming process.
- Cryptocurrency blockchain is safe but wallets and exchanges can be hacked.
Myths about cryptocurrencies
Due to the popularity of Cryptocurrencies, many myths have been created about them. Some of the myths are as follows: –
- Cryptocurrency is non-taxable
Yes, cryptocurrency is not controlled by any central authorities but this doesn’t make the transaction tax-free. Whenever you buy or sell crypto you have to pay a tax.
- Cryptocurrency doesn’t have real money value to them
Cryptocurrency can be stored as a material but it doesn’t mean that the trader or investor doesn’t have any value in it.
- Cryptocurrency is illegal money
Although many countries have banned the use and mining of cryptocurrency, it doesn’t mean it is illegal. Many countries like the USA, EU nations and G7 nations have made cryptocurrency a legal tender.
- Cryptocurrency is easy to hack
As explained above it is very difficult to hack cryptocurrency. Crypto transaction is like any other, if the wallet and exchange are done through the proper portal it is secure.
- Cryptocurrency can’t be traced
Blockchain maintains the ledger for all the transactions been done. They maintain anonymity but it is not impossible to identify a user and their details.
