After 2010, there has been so much talk about cryptocurrencies and sometimes euphoria. It came unnoticed and then exploded with thousands of investors claiming to have earned obscene returns in a short period of time. At this time, people who knew a bit about stock markets invested in the new digital currencies, particularly, Bitcoin, which is considered the most important of all cryptocurrencies. Bitcoin was born in 2011 holding around 45% of the crypto market. The 2nd wave of investors also invested amazing returns on their investment.
Then, there came a period after 2016 where the euphoria seemed to be over. Everybody considered them a flash in the pan phenomenon which was good while it lasted. However, the digital currency has a tendency to bounce back stronger and reminding us that it is here to stay and might even become the currency of the future. Within a short period of time, the trading in Bitcoin has exceeded even the biggest MNCs and motivated by the success of Bitcoin numerous other cryptocurrencies were launched. It might be amazingly successful but there are few people that understand Bitcoin or other cryptocurrencies that have become popular in the market. These currencies are not backed by the governments and are not physical but exist digitally. So it is important to understand what a crypto currency is and what technological innovation backs it up.
What is Cryptocurrency?
Cryptocurrency is a digital currency whose valuation is not driven by a fiat. Instead, it is done by the blockchain technology. Being created with cryptography, the currency is immune from the risk of counterfeiting. Since it does not owe its value to a government’s decree or fiat it is not subject to nay central authority.
Cryptocurrency is run with high-tech tools including encryption algorithms and cryptographic techniques which are crucial for the protection of the transaction entries. Highly secure technologies such as elliptical curve encryption, public-private key pairs, and hashing functions are used in the blockchain technology for safe working of the virtual currency.
Also read: Six Major Cryptocurrencies
There are many advantages of using a digital currency including transparency. You know how the currency is valued as its valuation is created right in front of you in the blockchain operations. Unlike the traditional currencies, it is not so easily pliable to the influence of inflation and is more easily portable and divisible.