What is Cryptocurrency?

The highly profitable Cryptocurrency in 2023 is ‘Bitcoin’. Many new Crypto currencies are gaining momentum, which can provide opportunities to investment. The new cryptocurrencies are Ethereum (ETH), Decentraland (LAND) , Shiba Inu (SHIB), Cardano (ADA), Ripple (XRP), Binance Coin (BNB), Lucky Block (LBLOCK). Anyone can start investment in these new cryptocurrencies and earn high profits.

Cryptocurrency is a digital payment system that can enable everyone to buy and sell digital currency in the world. It is also called Crypto. It is a medium of investing money. The transaction records in a public ledger when anyone can transfer funds. Moreover, the public ledger is a record of all transactions update. Cryptocurrency is a digital currency or asset.  It uses cryptography to secure transactions. Cryptography is a network that secures the currency, which is impossible to copy and double-spend.  It is a secure network of payment.

The central authority and government do not issue the crypto, so it is out of government interference. It is a decentralized network. This is based on blockchain and is also distributed to a large number of computers in the world. A currency holder can buy and sell currency from Cryptocurrency Exchange.

How does it work?

Cryptocurrency is based on Cryptography and Blockchain systems that use encryption to verify transactions. The main aim of encryption is to provide security and safety to transactions. The transaction does in a crypto wallet. A cryptocurrency wallet is a software that stores currency and coins safely and allows the currency holder to transfer funds from one account to another account. The wallet is of two types, one is Hot Wallet and another is Cold Wallet. The Hot wallet helps in connecting to the internet and use to send and receive money. On the other hand, a cold wallet is a hardware device that keeps the records of coins separate and offline. It is not connected to the internet. The wallet secures with a password called the private key. A private key is like a unique bank account for every currency holder. The currency holder owns multiple keys and sent all the funds using those keys. The transactions are recorded in a public ledger.

Blockchain:

Blockchain is a database that is maintaining a secure and decentralizing record of all the transactions of crypto. It records all data in ‘blocks’ that link in chronological order. Each block contains a set of transactions. Block has independently verified each member of the network. Every new block that generates must be verified with the node before being confirmed. This system makes it almost impossible to forge transaction histories.

Cryptography:

Cryptography is software that makes the blockchain secure. Cryptographic code is also known as “hashes”. It is a secured network of payment. All cryptocurrencies are depending upon mining.

Mining:

Mining is a process used to generate new coins and also verify new transactions. Miners can solve some mathematical puzzles to generate new coins. It is a difficult task.  Moreover for mining, we should require a powerful PC and mining software.

Top 5 types of cryptocurrency

There are many types of crypto; however some of important are-

• Bitcoin:

Bitcoin was founded in 2009 by a group of people named Santoshi Nakamoto. But the first trading started in July 2010. It was the first cryptocurrency and still the most commonly traded. Bitcoin is a decentralized digital currency that can be sent from user to user by using a peer-to-peer network without the interference of intermediaries. All the transactions are recorded in a public ledger and secured by cryptography. The whole system is called “Blockchain”. March 2022, Bitcoin has the First-largest market capitalization at $2 trillion. The price of bitcoin changes in seconds.

• Ripple:  

       Ripple was s founded in 2012 by Chris Larsen and Jed McCaleb. It is a digital payment system for financial transactions. Mainly Ripple is a company name and network, XRP is a crypto token.

• Ethereum:

Ethereum is another type of crypto. It was developed in 2015. It is the most popular currency after Bitcoin. Ethereum has its currency called Ether or Ethereum, based on a blockchain platform.

• Litecoin:

Litecoin was developed by Charlie Lee, a former Google engineer in 2011. It is based on an open-source global payment network. Litecoin is like bitcoin in many ways and is referred to as a “sliver to Bitcoin’s gold”.

• Cardano (ADA):

Cardano is an “Ouroboros Proof-of-stake” crypto that is created by cryptography experts. March 2022, Cardano has the Eighth-largest market capitalization at $38.5 billion, and one ADA trades for around $1.0.

• Dogecoin (DOGE):

Billy Markus and Jackson Palmer developed Dogecoin in 2013. It is considered the first “meme coin” that is the first Dog Coin. The main feature of this coin is the face of the Shiba Inu dog used as its Logo and namesake.

Advantages and disadvantages of cryptocurrency.

Advantages of Cryptocurrency

• Decentralized System: It is based on a decentralized system in which no interference from Government, bank, monetary institutions, and other intermediaries. These institutions are not enforcing their rules and policies on the transaction between two parties. Thus, this system makes the cryptocurrency trade corruption-free.
• Easy transfer of funds: It makes it easier to transfer funds from one party to another party without the interference of any third party like a bank. Such funds transfer between two parties secures with the user’s private key and public key and another secured system such as “Proof of work” and “Proof of stake”.
• High Profits: We can earn high profits by investing funds in crypto. Bitcoin is a highly profitable currency. Crypto market price has skyrocketed in value over the past decade.
• Accessibility: Anyone can buy currency from the crypto exchange at any time. The currency holder needs just a Computer or Smartphone and an internet connection. There is no need for any bank account and ID verification. Crypto wallet opens after some following requirements of crypto exchange.
• Security: The cryptography and blockchain secure the Crypto wallet. There is no chance of any fraud and hackers. Moreover, the Private Key and Public Key also secure the Cryptocurrency Wallet.
• Transparency: All transaction takes place on the blockchain ledger. Anyone can see how many transactions take place including when and where. The software also showed how much currency stored in a wallet.

Disadvantages of Cryptocurrency

• Lose of funds:  Cryptocurrency wallet secures with Private Key. If the currency holder lost his private key, he also lost his funds.
• Change of value: The value of a currency frequently changes. It changed in seconds. So, people don’t feel safe investing in currency.
•  Specific authority:   The crypto exchange did not regulate by any specific authority like the Government or Bank. So there are no rules that protect your funds.
• Hacking: It is highly secure, but some hacker hacks wallets and exchange. Many cryptocurrencies hack and the currency holder lost their coins and funds.

Cryptocurrency in India 2022

In India Union Budget 2022, Finance Minister announced that any gain from crypto and other tokens will be taxable at a flat 30% and when any such transaction takes place 1% tax will be deducted at source. Finance Minister said all the profit-making transactions should be taxable. However, it is not illegal in India. Reserve Bank of India will launch digital currency in India in FY 2023.

Dr. T Rabi Sankar, Deputy Governor, Reserve Bank of India said in a recent speech that “cryptocurrency is a decentralized system in which participants authenticate transactions themselves by consensus. They are designed to control the financial system. They cannot be traced and frozen by governments. They are nameless—transactions are verified, but not the purposes or counterparties of transactions.” 

Moreover, many billionaires donated cryptocurrency during the time of Covid-19 to India. One of them was the co-founder of Ethereum named Vitalik Buterin. He donated about $1 billion in cryptocurrency in the form of Ethereum and Shiba Inu coins to India as a Covid relief fund. The actual value of the coin in Indian currency was Rs 7,324 crore.

  FAQs of Crypto, if you want to know anything about cryptocurrency then read the following FAQs.

Q.1).   What is cryptocurrency?

Ans.    It is a digital currency or asset that can be used for investing money and buying things.

Q. 2). Is cryptocurrency legal in India?

Ans.   Presently, there are no rules and regulations or any ban on crypto trading in India.  So it is traded and does not make illegal in the country.

Q. 3). Which coin is more profitable in cryptocurrency nowadays?

Ans. Bitcoin is a more profitable currency. March 2022, Bitcoin has the First-largest market capitalization at $2 trillion.

Q. 4).  Is cryptocurrency a good investment?

Ans. Yes, It is a good investment and extremely profitable.  The price of currency changes in seconds.

Q. 5).  Is investing money in crypto safe?

Ans. Yes, investing money in crypto is safe. However, it secures with Blockchain and also Public and private keys.

Q.6). How are transactions recorded?

Ans. Crypto transactions are recorded in a digital ledger called Blockchain. This is a decentralized system that record transaction and spread them across many computers.

Q.7).  What is a Crypto wallet?

Ans.  A crypto wallet is software in which users can store currency safely.  This is two types one is a hot wallet and the second is a cold wallet.

Q.8). What is a hot wallet?

Ans.  A hot wallet is connected to the internet and used to send and receive currency. It also shows how many tokens are available to use.

Q).9).  What is a cold wallet? Ans.  A cold wallet is not connected to the internet. It is a hardware device that keeps the record of currency. Moreover, It is a safe way of recording the currency.

Q.10). What are the top five cryptocurrencies?

Ans.  1).  Bitcoin

2).  Ethereum

3). Tether

4). Binance Coin

5) Ripple(XRP)