What is cryptocurrency, and how is it different from traditional fiat money? What is blockchain, the technology powering the cryptocurrency rage? Let’s find out.
Back in 2008, a person or a group of persons (no one knows for sure), under the pseudonym of Satoshi Nakamoto, published a whitepaper about the first cryptocurrency and introduced the first digital coin or digital money, namely Bitcoin. With this, that nameless person or persons ushered an era of a revolutionary technological innovation centering around a new digital and decentralized currency, generally termed cryptocurrency.
Although no one knows the actual person behind the concept, the idea stuck with the masses and kept on gaining huge popularity, and now it has reached a point where you will find a new digital coin every other day. Interestingly, more than two thousand different digital coins or cryptocurrencies are doing around in digital corridors.
So, what is fueling the cryptocurrency revolution, and which technology is behind this whole idea? Let’s learn in detail.
Cryptocurrency is a combination of two words, crypto and currency. While later denotes the form of exchange similar to traditional money, the former signifies the inherent technology which powers these exchanges and keeps the transaction safe and secure.
In simple words, a cryptocurrency is a form of digital payment method which employs blockchain technology to validate transactions. Unlike the physical form of currency, which involves banknotes and coins, cryptocurrency only exists in digital form, and all the transactions and exchanges are done digitally.
Blockchain is the technology that powers cryptocurrencies and keeps their circulation in check and all the transactions secure. A blockchain is a decentralized database or a ledger of a cryptocurrency, where all transactions are listed in the form of blocks. A chain of blocks spread across several computers throughout the world stores all the transactions of the network members. In simple terms, the blockchain is a combination of computers connected to each other but not to the central server.
Being a decentralized database, transaction data is not stored on a single server but spread to a network of computers. Any transaction data is copied to all the computers in the network. Therefore it can’t be changed or copied without the consent of all the members of the network. As a result, it eliminates any possibility of hacking or system failure.
Such is the popularity of cryptocurrencies that there are around two thousand coins in circulation, with a total market capitalization of $ 800 billion. Among these, Bitcoin is the king and holds the most value in terms of exchange and transactions. Not far behind are Etherium and Ripple, with a market capitalization of around 24 and 22 billion dollars.
The advent of Cryptocurrencies has been the most disruptive event in the financial sector in recent years. The unprecedented rise and the public trust these currencies have gained is nothing short of revolutionary. Although Cryptocurrencies are a raging trend in the digital transactions space and have risen to the fore through their amazing performance, these currencies still struggle with stability. Perhaps the lack of central authority is the reason for the instability; however, the decentralized nature is also the primary strength of these cryptocurrencies.