A cryptocurrency is defined as digital or virtual currency that is secured by cryptography technology. That means there is no physical coin or bill for transactions. It are stored in a digital wallet or you might even store them in a hardware device known as cryptocurrency wallet, which is similar to a USB thumb-drive, however these devices are illegal in many countries.
You can buy cryptocurrency using a credit card or, in some cases, you can get it through a process called “mining”.This is the most secure currency for online transactions because no one can trace or track them and such payments are typically not reversible. Most of the smugglers, terrorists, weapon dealers and hackers use this type of currency to protect themselves from Cyber Police and Army Intelligence.
Different types of cryptocurrency:
- Bitcoin — Bitcoin is the first cryptocurrency which was invented in 2008. It’s a currency without single admin that means currency can be send from one user to another on the peer-to-peer Bitcoin network.
- Ethereum — Ethereum is similar to Bitcoin but you’ll have to pay a small fee in ETH to use Ethereum. This fee is for a miner to process and verify what you’re trying to do. They also check and prove that no one is cheating with the currency.
- Litecoin — Litecoin (LTC) is decentralise money, free from censorship and open to all.
- Ripple — The Ripple cryptocurrency create by Ripple Labs Inc. a US based Technology Company. Ripple supports token representing cryptocurrency. It also known as the Real-Time gross settlement system.
Advantages:
- User Autonomy – Using cryptocurrency enables the users to control their money- how they spend without dealing with an intermediate authority like a bank or government.
- Peer-to-Peer Focus – Users are able to make payments (send and receive) directly to or from anyone without requiring approval from any authority.
- Discretion – The address of purchased Bitcoin changes with each transaction and they are very less readily link to personal identity. Due to this property cryptocurrency is untraceable
- Elimination of Banking Fees – There is no public/government bank directly or indirectly link to the cryptocurrency digital wallet. So, there is not any kind of additional charge.
- Low International Transaction Fee – This type of transaction are independent and no intermediate authority to control them, which eliminates the formalities of government organizations and authorities.
- Accessibility – Users can handle their digital wallet with their smartphones and it is as simple as other online payments.
Disadvantages:
- Non-reversible – If someone sends funds to the wrong wallet address, the coin can’t be retrieved by the sender.
- Use for illegal transactions – Due to their untraceable property and their high security & privacy, these are mostly use for illegal transactions.
- Data loss can cause financial loss – If any user loss their wallet’s private key, there’s no getting it back. The wallet gets lock with all the coins inside it.
- Adverse effect of mining on the environment – Cryptocurrency mining requires advance computers or supercomputers along with high consumption of electricity which directly affects natural resources and the environment.
Uses:
- For Online Shopping – There are many merchants who accept in this payment, however they prefer Bitcoin payment as compared to other digital currencies like ripple, Litecoin for their product and there are some websites which accept only Bitcoin payment.
- investment – Many small entrepreneurs invest their money in cryptocurrency- they purchase currencies when price is low and sell when prices high like before the ransomware attack, 1 Bitcoin value was $5,350.91 USD as on 1st May 2019 and at the time of ransomware attack, prices increased continuously and 1 Bitcoin value rose to $9,757.47 USD as on 2nd Sept. 2019.
- Acceptance as Business payments – Receiving international transactions in Bitcoin helps to avoid government and banks formalities and it also saves the transaction fees and additional charges.
A cryptocurrency value changes constantly
No one knows when the cryptocurrency value will get change. Sometimes its value changes every minute, hour, and day. Maybe your $100 digital currency value rises to $1000 overnight or may it may even go down to $10 next hour. Moreover if the value goes down, there’s no guarantee that it will go up again.
Cryptocurrency Scams:
As more and more people get interested in digital currency, scammers find more ways to scam. For example, they promise to double your investment in short time, they promise free cryptocurrency or USD, promote their fake investment company, and promise to convert USD to Cryptocurrency without any charges.
Written By: Nikhil Mehra
Reviewed By: Sayan Chatterjee
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