Hey Guys,
Hope you all have been doing fine all these days. Past few days I have been researching about crypto currency because of two prime reasons:
So here I am sharing a few of the details that I have researched and hope you all like it. I am new to this so requesting for any valuable feedback in the comment section.
What exactly is Crypto currency?
It is any form of currency that exists digitally and uses cryptography to secure transactions. Yes, I know this isn’t enough because the question still remains the same: what exactly is crypto currency? Crypto currency is made up of two words where Crypto means secret/private and currency is a medium to buy and sell products.
Crypto currency is not any tangible form of currency, it exists digitally and can be spent that way only. It is a digital payment system which does not rely on any authority and verification process. Its peer-to-peer network enables and eases the transactions which are recorded in a public ledger i.e. open to all.
Example:
Sam bought a few goods from Tam, now Sam pays Tam via digital currency, let’s say XYZ. Now as we all know this currency is in a digital format which can be copied or multiplied and used as an attachment over an email to give it to someone else. What is done instead is that a public ledger is maintained which is open to all where records such as what amount of digital currency was with Sam, how many he gave to Tam and how many are now left with each party etc. This is called peer-to-peer network and the technique used for this activity is known as blockchain technology.
History:
It is always important to know where the talk of the town started. It eases the way and also explains why this technology was brought to the world. The crypto currency was first stated in the 1980s and in the early 1990s the protocols and software started to develop to enable the creation of a decentralized digital currency.
Mining and Miners:
Now that we have understood what crypto currency is, let’s understand how it is generated and brought out for normal trading in lay man’s terms. In daily routine transactions like Sam and Tam’s are recorded and validated but there isn't just one such transaction there are millions and millions of such transactions that take place daily. A complex computational and technological process of validating the transactions over the specific currency’s network is called Mining. For solving such complex mathematical calculations each miner is rewarded with a coin of the same network. People who are involved in this process are known as Miners.
How does this work:
If you have invested in the share market you must know it works completely on the basis of demand and supply. A company distributes its capital in equal amounts of shares (like a pie has six equal shares) and when brought to public they shoot up and bring the prices down of the share. Similarly, there is a fixed amount of digital currency in the market and if the demand increases for it due to any reason it will raise the price of the currency in the market and vice versa. It may be due to any reason, straight from investors to any speculative news to any company’s decision.
For example: In March 2021, Elon Musk declared that his company Tesla will be accepting Bitcoins for the purchase of cars. Suddenly the prices of Bitcoin went sky high and a few days later when he stated that the decision was rolled back due to climate concerns it fell down.
Cryptocurrency has its own pros and cons which we will be discussing in the next article. It works on a very standard rule that is higher the risk higher is the return still people must invest sensibly, know your risk taking capabilities and invest accordingly, don’t be lured with excessive growth and move cautiously in the market. Study, Plan, Invest and Enjoy!
That’s it for today guys, hope you enjoyed reading. Let me know your views in the comment section below. Thank you for stopping by!
