Cryptocurrency is a digital currency eliminating the need of having a physical currency in the form of a coin or note. A cryptocurrency is secured with cryptography – a digital tool used to secure information through coding, in this way a cryptocurrency cannot be forged or double-spent. Usually, cryptocurrencies are based on blockchain technology.
Blockchain technology is a special form of data storage. Blocks store the data which are then chained together. A new block is formed for new data, as the data is complete and the block is filled, it will be chained with the previous blocks.
Following are the types of cryptocurrency widely used
• Bitcoin (BTC)
• Litecoin (LTC)
• Ethereum (ETH)
• Bitcoin Cash
• Ethereum Classic
• Zcash (ZEC)
• Stellar Lumen (XLM)
• Bitcoin Satoshi’s Vision (BSV)
Bitcoin is the first form of cryptocurrency that started in 2009. It’s a form of digital or virtual currency that does not involve mediators (bank, government or any third party) for transactions. Unlike physical currency, bitcoin is operated by a combination of cryptography (explained earlier) and a network of people like those Wikipedia volunteer editors. In this way, the currency is backed by software keeping it secure with the sender and receiver.
Every Bitcoin is stored as a computer file in a digital wallet, and it can be easily accessed via a computer or smartphone.You can check Bitcoin Prime review for further information.
The science of bitcoin can be understood in the following paragraphs:
Blockchain as discussed earlier, it is the digital form of storing data that creates a public ledger. Each transaction is termed as a block that is chained with the code, maintaining a permanent record of every transaction.
Each bitcoin wallet has two keys, public and private. Both the keys work together letting the owner start and digitally sign the transactions, giving authorization proof.
Bitcoin miners make sure the system is secure and the transaction is processed by using computational algorithms. The process takes 10 – 20 minutes and involves the chaining of transactional blocks. In return, miners get their reward in bitcoin.
There are two types of digital wallets for storing bitcoin.
A trusted exchange or provider store bitcoin in the cloud which can be easily accessed using a computer or smartphone.
It is more like an encoded portable device similar to a thumb drive allowing the owner to download and carry bitcoin. A cold wallet is not connected to a computer system, unlike a hot wallet. Meanwhile, a hot wallet is required to download bitcoins in a cold wallet.
Pros and Cons of Bitcoin
Price Volatility, people started to populate the bitcoin market, resulting in a spike in the bitcoin’s price. Having seen this scenario, people who bought Bitcoins in 2017, suffered losses as compared to those who bought Bitcoin at the end of 2018 (December).
Hacking, while backers claim that blockchain technology is the safest as compared to the traditional electronic money transfer, hot wallets have been the target of hackers. As per the news in May 2019, more than $40 million in Bitcoin was stolen from high profile accounts on the famous cryptocurrency exchange Binance. Although the company made up for the loss.
Limited Use, some giant firms with the likes of Microsoft, AT&T and few others have started accepting bitcoin payments, but these companies are not a rule, just a mere exception.
Not Protected by SIPC, usually, Securities Investor Protection Corporation cover for brokerage fails or stealing of funds in their insurance plan for up to $50,0000 but this insurance plan does not apply to cryptocurrency.
Secure transactions, bitcoin transactions are safe and time-efficient (less time). Moreover, the transactions are free from the use of personal information like they don’t need a name or credit card number which eradicates the risk of identity theft or information being used for false purchases.
Potential growth, bitcoin investors bet that after the maturity of bitcoin its value will increase.
Zero involvement of mediators, the best thing as per the investors is no involvement of bank, government and third party. Transactions remain between the sender and receiver without any intermediary.
Exchanges are operating in many parts of the world and trading a large number of cryptocurrencies.
Investment brokerages are operating to promote bitcoin purchases. Robinhood was the pioneer to offer bitcoin and other cryptocurrencies in the USA.
ATM are in place in the USA to facilitate those who want to purchase bitcoin.
Peer To Peer Purchase
People can directly buy bitcoins from other owners through different tools.
Mining comes with technical expertise and computer costs which makes it the least used purchase method.
Bitcoin – a digital currency is gaining the trust of the investors in the market courtesy of its safe transaction and storage. Where it offers many advantages to the investor, there are also some disadvantages, but these can be fixed with tricks and techniques.