We all have one question on our minds Cryptocurrency? what is it? and how cryptocurrencies work? and why do we need them?First of All we need to Know what is currency. Like the old times you exchange one good for another e.g. You need to buy rice then you can get the same via exchange of other goods like you can exchange wood for rice or some other commodity, the problem arises when one want to buy rice but he doesn’t had wood or someone want to buy wood he doesn’t have rice. This erupts into the combination of mismatched transactions and one could fall into problems.
Rise of Currencies – Bitcoin vs Others, Why We Need Cryptocurrency
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First Currency Came to Existence
So, to tackle this kind of issue In the early ages metal were used as the medium of exchange. Metal’s had carvings in it to represent the value stored in it. This way one can save lots of problems like one could sell his wood for a certain amount of metal currency and could buy anything he want to buy. So, now he doesn’t have find the exact commodity to get his trade. But these metal currencies were bound to their military boundaries.
Metals as currency
Now when trade happens between two military boundaries there problem arises. Like merchant from place A want to trade in place B, But he didn’t have the currency of place B to buy commodity. This leads to lots of issues in inter military boundaries. To solve this several treaties were made to facilitate these type of transactions. Value of metals were also differentiated from non-precious to precious one. like copper, bronze, silver and gold or stone, ivory, ruby etc.
Metals were mined, weighed and stamped into currencies or coins. Coin can be easily counterfeited and there was problem to transport coins as it add weight. to counter this now paper currency were introduced which were light in weight were easy to carry from one place to another. But to other side of it a note has no intrinsic value. So, one can print as much of notes he wanted. which could lead to BUBBLE. Which means there would be more notes one require and thus diminish the value of currency. As hard working people would demand more and more money and thus the value of currency starts declining e.g. 1 Kg of rice which you can get for 10 notes would be increased to 100 notes to 1000 notes and so on in this situation. This really is a severe situation.
To tackle these Banknotes were introduced. Banknotes are both coin and notes, which are issued and controlled by central agencies. Which prevents the inflation rate to go higher. Banknotes are not only made of paper but made of certain polymers. Which helps to prevents counterfeit currencies. Modern currencies are based on lex monte.
So, If all problem were solved why we need Cryptocurrency.
Problems we solved till Now.
1. Facilitates Medium of exchange, Goods can be Buyed with currencies.
2. Exchange of Currencies between Military Boundaries, Inter Territory Buisness.
3. Ease of Transport in Currency, Lesser weight now.
4. Prevent Inflation rate and centralize currency, Saves Hard Earned money.
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Why We Need Crypto-Currencies?
In 2009 Bitcoin was first introduced and the concept of cryptocurrency had been spread. Nowadays we store our hard earned money/currency either in lockers or in banks. Think when you make payment through your debit/credit card or any other banking option. What happens, First transaction goes from the client to a series of server and then server verifies the transaction and transaction completes. So, the question still remains Why do we need Cryptocurrencies?
Bank transactions are bound to monetary policies and are governed by central bodies. If you are making transactions between two central bodies. Then it may take much more time to clearance, and is subjected to various laws and regulation and high transaction fee. However cryptocurrencies are mostly decentralized and carries a lower fee, It also helps in faster transactions. and here transactions are verified by miners instead of centralized servers to Know it Better you can refer to this Image.
How Cryptocurrencies Work?
So, We can define Cryptocurrency as a digital money which is created from computer codes based on certain algorithm. and is free from any governmental influence. Here miners can be anyone you me or anyone who knows about computers. This is done as Someone Requests a transaction, the transaction is then broadcasted to a peer to peer network. In peer to peer network the nodes are computers, which can be own by anyone. The nodes then confirm the transaction and a new block is then added to the existing blockchain of that cryptocurrency. and then the transaction confirms. There are several algorithms on which cryptocurrencies are based we will discuss them in other post briefly.
From this we can differentiate and know the evolution of currencies. How they are different from each other and why are they useful. The cryptocurrency market today is growing rapidly and had shown any noticeable growth of 300 Billion Dollars Market Cap which is less than of VISA 255 Billion and much more than of Paypal i.e. 88.93 Billion. For such a short time this growth is immense and Cryptocurrency adaptability is growing day by day. As cryptocurrency is decentralized, and had no intrinsic value as of Gold or copper
Characteristics of Cryptocurrency/Bitcoin in a nutshell is
1. Not govern by anyone i.e. Decentralized.
2. Not centralized, Mined by miners, it could be anyone.
3. No intrinsic value as it is based on computer code.
4. Had a Limited supply, Control over inflation.
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Do We Really Need Bitcoin or Any Other Cryptocurrency
But we can not say any currency to be perfect. Currencies were always different in different time periods, some currencies were made of copper, paper and even made of computer code. So, Is Bitcoin or any currency is it good for us? we have to decide it. Some of us had made our investment in Bitcoin solely of it’s tremendous growth in last years. But other than that we also seen the market cap of bitcoin and solely bitcoin is at ranked 27 at all currencies. Which surely is astonishing.(source- buisnessinsider) This sure impacts our lives at both global and personal levels. Today it seems that bitcoin is the future of currencies and we all have to learn more and more about the same. If you want to learn more about cryptocurrencies you can learn with us. i will be posting more such content on this website.