A cryptocurrency is a digital or virtual currency that is designed to be secure and in many cases, anonymous. It is a currency accompanied with the internet that uses cryptography, the process of converting legible information into an almost uncrackable code. The first cryptocurrency to be created was Bitcoins back in 2009. Today there are hundreds of other cryptocurrencies, often referred to as Altcoins.
Unlike centralized banking, like Reserve Bank, where governments control the value of a currency like INR through the process of printing fiat money, government has no control over cryptocurrencies as they totally decentralised.
How cryptocurrency work?
Cryptocurrencies use decentralised technology to let users make secure payments and store money without the need to use their name or go through a bank. They run on a distributed public ledger called blockchain, which is a record of all transactions updated and held by currency holders.
There are two ways by which one can make money using Cryptocurrencies:
Mining: One may mine a specific Cryptocurrency to solve mathematical problems and receive rewards awarded by the network. Mining is a process by which a miner validates a transaction and records it into the Blockchain. Fees are paid by the sender of each transaction to have their transaction recorded within the Blockchain.
Investing: As is with any stock, Cryptocurrencies are no different. Cryptocurrencies are subject to change in value based on Supply and demand. Investing in Cryptocurrencies bear almost the same risk as stock markets given that Cryptocurrencies aren’t insured and would be subject to fluctuations, however predefined supply algorithms usually play an important role.
Most Commonly used cryptocurrencies
- Bitcoin : Bitcoin is first and most commonly used cryptocurrencies till date. The currency was developed by Satoshi Nakomoto in 2009 and developed its block chain. It has a market capitalization around $90 billion as on Oct 2017.
- Ethereum : It is also one of the fastest growing cryptocurrencies, ethereum was developed in 2015 which is used in the ethereum block chains. It has a market capitalization around $ 30 billion as on Oct 2017
- Litecoin : It is very much similar to Bitcoin but developed faster with new innovation and faster way payments and processes to allow more transactions. It has a market capitalization around $1.4 billion as on Oct 2017