Cryptocurrency- The Power of Stateless Money!
Cryptocurrency has been a buzz for some time now.
“Never before have young people been able to change Economic Classes so quickly” – Erik Finman (Bitcoin Millionaire)
Totally agreed with Erik. Investing in Cryptocurrency is one of the fastest means of attaining wealth. But a lot of us are still hesitant of buying or investing in Cryptocurrency. And the major reason is, they still have no idea what cryptocurrency is and how it works.
The main intention of this article is to educate layman - what Cryptocurrency is, so sit back and relax get a cup of coffee and read through. By the end of the article, I am sure you will be clear what Cryptocurrency is and how it works.
Back in early 90’s, people used to ask, “What exactly the Internet is?” After 28 short years later (today), it is a question that no more exists. Internet has become an integral part of our day to day life today. Isn’t it?
And I am sure after a few years from now, there won’t be a need to ask, “What is cryptocurrency?” Just like the Internet, it will be a part of our everyday activities and lives.
Starting with the definition.
Cryptocurrency is a digital currency that uses cryptography for securing transactions and for verifying the transfer of assets. Both public and private keys are used to make the transaction between individuals.
Some terms associated with cryptocurrency:
• Digital: Yes, it is a digital currency. That means it only exists in the computer systems, not in your pocket. It doesn’t have a coin with a picture or a paper with a note ‘In God We Trust’ written over it.
• Global: There is no separate cryptocurrency for the US or Spain. It is same in every country. One can use it freely across any part of the world.
• Decentralized: There is no physical bank exists where one can deposit his/her cryptocurrency. Everyone is the in charge of their money. It is not managed by any centralized server.
• Peer to peer: As I said there is no bank where one can deposit his money. All the transactions are carried out online from person to person.
How cryptocurrency works differently from normal money (Fiat money)?
Let’s understand with an example: Adam is a hardware engineer and he is very hungry at the moment. And Eve is a content writer who wants her computer to be repaired. Eve goes to her bank and withdraws $10. Here, the bank acts as a trusted third-party system. Then she paid Adam $10, as he repaired her computer system.
Adam trusted the money (because it was issued by the Government) he got from Eve and knows he can buy a Burger for $5 from it. And put the remaining $5 in a bank for future.
This is how a normal or Fiat money rotates. Here Adam and Eve both have a trust on a third-party mediator (the bank) for transactions.
Now, let’s see how cryptocurrency works differently:-
Unlike fiat money, cryptocurrency doesn’t need any bank or government body. Users (Adam and Eve in case of example) can send money to each other without trusting each other.
I know you are wondering how? How is it possible to make transactions without building trust?
Cryptocurrency record each and every transaction (like the one between Adam and Eve) on a common shared platform called Blockchain. It is shared with thousands of computer systems called nodes.
The node is responsible for verifying each and every transaction under a process called mining. Mining makes sure that all the transactions which are verified are correct and then added them to the blockchain. Once the information is added to the blockchain, it cannot be deleted or changed.
In this whole transaction, you don’t have to provide your name, address, or any other kind of personal information. You have your own public and private key. It is just like your email account. The public key is like your username and private key acts as the password.
The name and location of users are hidden from the public but all the transactions are public. Anyone can see the transactions that happen on the blockchain. But it is not possible to find the users behind it.
So, if someone asks you, what is a cryptocurrency? Tell him, it is a form of virtual money that you can send to anyone who lives on this planet (without the need of a bank).
Both developed and developing nations of the world are trying to legalize and regulate the use of cryptocurrency in some way or another. Even the countries like China and Russia with strict regulations and political restrictions are trying to make it available so that people can make Global transactions more freely.
We are standing at the start of a new era which is really exciting. And I am sure, cryptocurrency will help in attaining financial freedom. Using cryptocurrency will make you a member of the global family who is free to trade across borders. The concept behind cryptocurrency is very fascinating, interesting and exciting enough to make people know more about it every day.
Okay! I have to go for now but soon come back with my next topic “How and where to buy cryptocurrency? “
Would like to hear what is Cryptocurrency for you? Let me know in the comment section and don’t forget to share this post. TIA
© 2018 Sreekant Unnithan