Everything you need to know about cryptocurrency

By Arun Dahal Khatri

Cryptocurrency:

Cryptocurrency is a digital currency designed to serve as an alternative medium of exchange to traditional physical currencies. It operates through complex computer networks and vast data structures, offering unique features that distinguish it from conventional monetary systems. One of the defining characteristics of cryptocurrencies is their self-verification mechanism, eliminating the need for financial institutions like banks to facilitate transactions. Furthermore, cryptocurrencies operate decentralized, free from the control of regulatory bodies such as governments or central banks, making them highly autonomous in their functioning and management of the crypto market. Unlike traditional currencies issued and regulated by central authorities, cryptocurrencies cannot be created or controlled by fixed regulatory bodies. Instead, they are generated through mining, which involves individuals using complex computer networks to solve mathematical problems, creating new cryptocurrency units. This mining process is essential to building and maintaining the crypto ecosystem.

A notable distinction between cryptocurrencies and physical currencies lies in their tangible nature. While physical currencies like cash or coins can be physically owned and transferred, cryptocurrencies exist digitally. The entire cryptocurrency-related transactions and data are recorded in intricate data structures, with each piece of information encrypted for enhanced security. This detailed record-keeping is achieved by implementing blockchain technology, a connected ledger system that certifies transparency, immutability, and protection against tampering or fraud.
The peer-to-peer system is a fundamental aspect of cryptocurrencies, enabling users to send and receive payments without intermediaries directly. This decentralized approach to financial transactions contributes to faster and more cost-effective exchanges, bypassing the traditional banking infrastructure.

It is essential to acknowledge that the world of cryptocurrency is highly diverse, with various digital currencies catering to different use cases and industries. Bitcoin, the pioneering cryptocurrency introduced in 2009 by an anonymous figure using the pseudonym Satoshi Nakamoto, remains the most widely recognized and extensively adopted cryptocurrency. However, numerous other cryptocurrencies have emerged since its inception, each offering distinct features and applications. Some cryptocurrencies facilitate everyday transactions, while others emphasize enabling smart contracts or supporting decentralized finance platforms. While cryptocurrencies present numerous advantages, such as quicker cross-border transactions and increased financial inclusivity for the unbanked population, they also come with inherent challenges and risks. Uncertainties surrounding regulations, potential security vulnerabilities, the prevalence of fraudulent schemes, and environmental concerns related to the energy-intensive mining process are among the factors that necessitate careful consideration before engaging in cryptocurrency activities or investments.
Moreover, cryptocurrency represents a digital currency intentionally designed to function as an alternative medium of exchange compared to traditional physical currencies. Cryptocurrencies offer features like self-verification, decentralization, and direct peer-to-peer transactions. Their creation through mining and record-keeping via blockchain technology contribute to their distinct nature. While cryptocurrencies offer numerous benefits, potential risks and uncertainties require diligent research and cautious decision-making for those interested in participating in the crypto market. 

Here are some of the most essential queries and answers regarding knowing cryptocurrencies. 

How can you mine crypto, and how is it recorded?

Previously, I mentioned that crypto is not issued through any regulatory bodies; it is mined through a complex computing system using different codes. To mine crypto coins, a person needs tremendous knowledge and complex computing ideas to solve mathematical problems. After solving the issues, coins have been generated and recorded in the cryptographic wallet. All the transactions related to the cryptocurrencies are recorded in the systematic public ledger called the blockchain. Blockchain records all the transactions associated with the buying, selling, and storing cryptocurrencies. It has considerable features to track all the relevant transactions virtually. Blockchain involves an advanced form of commerce. It uses encryption to provide safety and security.

How can I buy cryptocurrencies?
Although it doesn't have specific regulatory bodies, it has dramatically impacted the world financial market. Most developed nations and multinational companies have started accepting payments in forming crypto. A person who wants to take the crypto can easily buy through the various digital platforms and buy from brokers. Like the stock and commodities market, there are different crypto exchanges where buyers can buy the crypto and sellers can sell. There are various cryptocurrencies, including Bitcoin, Ethereum, Tether, Dogecoin, Letecoin, and more.

Purpose of buying Cryptocurrencies
There are numerous purposes to buy crypto from the market. Firstly, people buy crypto to make the transaction smartly without any transaction hassle and having low transaction fees. Because of its digital nature, all the transactions related to payment are recorded in the system so that a person doesn't need to make an additional account and statement to record the transactions. In addition, cryptocurrencies eradicate the traditional way of exchanging transactions and improve the financial system through the computer network. All the power of cryptocurrencies is centroid in the hands of the owner.

Who can buy and sell cryptocurrencies?
A broker company having the license to buy and sell the crypto can make the transactions. However, the government authority has to give legal permission to the broker and other trading companies. Most countries are still struggling to provide legal consent to the crypto market. People from where the crypto is not permitted cannot buy and sell the cryptocurrencies. Platforms like Binance are providing the services to buy and sell cryptocurrencies.

Are Cryptocurrencies riskier?
There is no involvement of any regulatory bodies to control the market formation of cryptocurrencies. Therefore, it is too risky. Without pioneer knowledge and a strong foundation of computer skills, a person can lose vast amounts of money from the crypto market. The price of cryptocurrencies is very volatile and does not have limits to increase and decrease. For that reason, it is riskier to buy cryptocurrencies.