Cryptocurrency is generally called crypto-currency or crypto. These are digital or virtual currencies, which use cryptography for secure transactions. Cryptocurrencies are not issued by any central agency or regulatory authority but are based on a decentralized system that keeps records of every transaction as new units are issued. Here, we provide you with detailed information about cryptocurrency.
What is Cryptocurrency?
Cryptocurrency is a digital payment system in which transactions are not verified by a bank. It is a peer-to-peer system, through which users can pay anyone at any time. Additionally, users are not required to carry physical currency with them or exchange currencies. Instead, payments in cryptocurrencies are made through specific transactions, in which payments are recorded in an online database. Whenever someone transfers crypto funds, the transaction is recorded in a public ledger. Cryptocurrencies are stored in Digital Wallets.
Cryptocurrencies got their name because of the use of encryption in verifying transactions. This means that an advanced level of coding is used from storing cryptocurrencies in the wallet to carrying out transactions. The main objective of encryption is to provide security and protection. Bitcoin is the most famous and the first cryptocurrency, which was launched in 2009.
How does Cryptocurrency Work?
Cryptocurrencies are based on a public ledger, called the blockchain. In this, the record of transactions of all currency holders is updated. The process of producing cryptocurrency units is called Mining, which involves solving complex mathematical problems using computers to create coins. Users can purchase cryptocurrency with the help of agents. They can be stored and spent using a cryptographic wallet.
If you have cryptocurrency, you don’t physically own anything. You have a key, through which you can pay with your cryptocurrency. Although Bitcoin has been in use since 2009, the use of cryptocurrencies and blockchain technology in finance is growing rapidly. Its use may increase in future. This technique is used in transactions with bonds, stocks and other financial assets.
How do transactions take place in Cryptocurrency?
Now you might be wondering how money is transacted in the Crypto Market, so let us tell you that Digital Currency Transactions are done through wallets like bank accounts. However, people have control over their wallets. This wallet has two addresses – Public Address and Private Address.
- Public address means the place where you send funds. Therefore sending digital currency from one wallet to another requires a public address, that is, it is necessary to enter the public address of the person to whom the cryptocurrency is to be sent.
- To access the cryptocurrencies inside the wallet, a ‘password’ or ‘private key’ is required. When you send a transaction from one wallet to another, it is secured by blockchain technology. Let us tell you that, unlike government-backed currencies, the value of virtual currencies like crypto completely depends on supply and demand.
Examples of Cryptocurrencies
- Bitcoin: Bitcoin was established in the year 2009. It is the first and most well-known cryptocurrency.
- Ethereum: The most popular cryptocurrency after Bitcoin is Ether (ETH) or Ethereum, which is based on the blockchain.
- Litecoin: Litecoin is also one of the popular crypto coins. Litecoin is known for its innovation, fast payments and transaction processing.
- Ripple: Ripple is a distributed ledger system established in 2012. Ripple is used to track a variety of transactions, not just cryptocurrencies. Ripple’s developer company works with various banks and financial institutions.
- Non-Bitcoin cryptocurrencies are commonly known as “altcoins”.
How to Buy Cryptocurrency?
To buy cryptocurrency you have to follow some steps…
Step 1: Selecting the Platform
First, you need to decide which platform you want to choose. You can choose between a traditional broker or a crypto exchange.
- Traditional Brokers: Many online brokers these days offer the option to buy or sell cryptocurrencies. These brokers offer the option of cryptocurrencies as well as bonds, stocks and other financial assets.
- Cryptocurrency Exchanges: Exchanges are also a good option for purchasing cryptocurrencies. These exchanges offer cryptocurrencies, wallet storage, and interest account options.
Before choosing these platforms, you should check how much they are charging and what facilities you are getting from them.
Step 2: Add funds to the Account
Once you have chosen the platform, the next step is to deposit funds into your account so you can start trading. Most crypto exchanges allow users to buy crypto using their debit or credit cards using fiat (government-issued) currencies such as US dollars, British pounds or euros. Buying crypto with a credit card is considered risky, and some exchanges do not support credit cards. Cryptocurrency is highly volatile, so it is not advisable to buy it by taking a loan. Some platforms also accept money transfers and wire transfers.
Step 3: Placing the Order
After adding funds to the account, you need to place an order for the cryptocurrency on the web or mobile platform of the broker or exchange. Along with this, users can also invest in cryptocurrency through fintech apps like PayPal, Cash App and Venmo. Users can buy or sell cryptocurrencies through these apps.
How to Store Cryptocurrency?
As soon as you purchase cryptocurrency, you need to store it securely and protect it from hackers or thieves. Typically, cryptocurrencies are stored in crypto wallets, which are physical devices stored online. Besides this, some crypto exchanges also provide wallets to the users. There are two types used to store cryptocurrencies – hot wallets and cold wallets.
- Hot Wallet Storage: Online software used to store cryptocurrencies in a hot wallet. No fee is charged from the users for this.
- Cold Wallet Storage: In this, an offline electronic device is used to store cryptocurrency. Users will have to pay for this wallet.
How is IBI’s Digital Rupee different from Cryptocurrencies?
- The digital currency or CBDC of the IBI will be created using blockchain and other technologies. The digital rupee is a digital form of legal tender, which will be under the control of the central bank. This exchange will be regulated by the IBI.
- Whereas cryptocurrency is a digital currency, which is not under the control of any central bank but is linked to a project created by a developer.
- Cryptocurrencies are not regulated by any government entity and their value depends on demand. Cryptocurrencies such as Bitcoin and Ether also work on the blockchain.
- Generally, digital currency is also known as cryptocurrency or crypto. Cryptography is used in this for secure transactions. Additionally, it uses a decentralized system for recording transactions and issuing new units.
FAQs
Question: How many CryptoCurrencies are in the World?
Answer: The number of cryptocurrencies in the world is constantly changing due to the creation of new coins and the closure of existing coins. As of my last update, there are thousands of cryptocurrencies, with over 7,000 known cryptocurrencies actively traded in various markets. Bitcoin, Ethereum, Ripple (XRP), Litecoin and many others are among the most well-known and widely used cryptocurrencies.
Question: How many CryptoCurrency apps are in India?
Answer: Until the last update in December 2023, there were many cryptocurrency exchanges and apps available in India. Some of the prominent ones include WazirX, CoinSwitch Kuber, Zebpay, Unocoin, and Koinex.
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