Everything You Should Know about Cryptocurrency and Bitcoin
If you invest $100 in bitcoin, then in a few days they will become $200.
Now before you get excited by listening and have gone to invest all the money in bitcoin.
How Volatile Bitcoin is?
I am trying to show you how volatile Bitcoin is. If something can go up so fast, it can also go down.
In fact, this is the general rule for every type of investment. If you are investing money anywhere and where you expect the investment to be very profitable, the risk will be high too.
Bitcoin price is growing rapidly. A few days ago it was at $30,000 and now peaked at $40,000. The total value of bitcoin has crossed $750 billion today. This means that today the market capitalization of bitcoin is more than the GDP of 80% of the countries.
One thing is very clear that whether bitcoin remains or not, cryptocurrency has definitely become a part of our future, understanding cryptocurrency is better and useful for all of us.
In our previous article, we have discussed the future of cryptocurrency, if you are interested you can check that.
What are the important parts of cryptocurrency, How to use cryptocurrency in reality, And what alternative cryptocurrencies do besides bitcoin and why?
A man named Satoshi Nakamoto created bitcoin as a form of alternative currency, the central bank controls all the existing currency, he created bitcoin as a decentralized currency that no bank or institution can control.
Basically, through their algorithm, new bitcoins can be discovered i.e. mined and these bitcoins can be traded between people using digital wallets and keys.
All the sections from bitcoin are recorded in a public account, which is called a distributed ledger. The special thing is that it is all public, anyone can access it and can see some details of each transaction. It is not all the details. The identity of the buyer and the seller are not revealed in this account because what has been taken here is decentralized. For this reason, it is almost impossible to hack.
Satoshi decided that the supply of bitcoin should be limited, so he did the coding in such a way that only 21 million bitcoins will be available because if the supply is limited and people want to buy more, then its value will increase.
To make Bitcoin more valuable and longer, Satoshi created an algorithm in such a way that as the new bitcoins will be mined, it will become more difficult to mine the upcoming bitcoins.
Of the total 21 million bitcoins, 90% of almost coins have already been mined, and it is believed that the last bitcoins will be mined in the year 2140.
Bitcoin is not perfect, and it has also some drawbacks, and to address the drawbacks of bitcoin, there are many more cryptocurrencies that come after bitcoin called ALT-COINS (Alternative Coins), because it is Bitcoin's Alternatives. Many Alt Coins try to address the drawbacks of Bitcoin itself.
Disadvantages of Bitcoin
For example, a very big complaint has been against bitcoin that it takes too long to confirm the transaction in bitcoin, it may take up to 1 hour to address this deficiency. An Alt-Coin Ripple (XRP) has also been created. It is said that it takes less than 4 seconds to confirm a transaction.
Another example is, an ALT-COIN, ETHER (ETH), its creators felt that the system of a limited supply of bitcoin is not right. They created ETHER, saying that the supply of our cryptocurrency would be unlimited and that 18 million new coins would be released every year.
After the success of bitcoin, many companies, organizations, and some countries also felt that we should create our own cryptocurrencies.
What are the Features of Cryptocurrency?
Each cryptocurrency has its own blockchain, and this blockchain is used to keep track of all transactions.
When a transaction completes, it gets added to the blockchain, as we have seen. Some cryptocurrencies take hours to confirm a transaction and some take a few seconds, but the most important thing is, the Transaction Reversing is not possible. Once this transaction is done, the block will be added to the blockchain.
That means to send money and withdraw, there will be a new block added to the blockchain, you cannot delete the old block, a record will be maintained of all the transactions.
2) Cryptocurrency Exchange
An exchange is an online platform where you can convert Fiat Currencies such as Rupees, Dollars, Euros into cryptocurrencies, and convert cryptocurrencies into fiat currency.
3) Bitcoin Mining?
Miner's job is to verify every transaction, check its accuracy, and maintain the security of the blockchain. Miners ensure that every transaction is added to the blockchain.
How hard is it to create a Cryptocurrency?
An important thing to understand here is that if you want to create a cryptocurrency, you have to create a new blockchain, It takes a lot of time to code a blockchain, it takes a lot of money, and it is necessary to have advanced technical skills.
Instead of doing it, you can create a cryptocurrency that works on the blockchain of any other cryptocurrency, this cryptocurrency is called Token. A token is a cryptocurrency that works on any existing Blockchain.
We have already discussed an example of a Token that is NFT (Non-Fungible Token). If you are interested do check it out.
You have to be very cautious in this matter because there have been many such stories where the company and individuals have created their new cryptocurrency which is a token and when they launched it, people buy it and then its price becomes very high and its founders sell their currency at a very high price and disappear with all the money.
This creation is called the pump and dump scheme in the world of crypto.
When you are deciding that I have to buy a new ALT-COIN or if you want to buy a token, then keep in mind which ALT-COIN you are going to buy, research about who has created it, what is the reason for creating that ALT-COIN, then decides whether you want to buy it or not. If you buy an unknown old coin that no one has heard about, then the chances are very high that it is a pump and dump scheme over there.
You will need a wallet to store cryptocurrency. And this is not always physical, it can be in the cloud, it can be in your laptop or in an external storage device such as a USB driver or a hard drive.
What are the Bitcoin Alternatives
The most popular old coin is ETHER. It is based on Ethereum's blockchain technology. It was launched in 2015 and has some critical differences if you compare it with bitcoin.
Ethereum uses a smart contract contact to guarantee transactions. In the same way, no third party is involved in the Ethereum platform. Two parties can enter into smart contracts with each other. Interesting thing is that this platform has many real-life applications, it has been used in health care, security, self-driving cars, etc.
Another popular old coin is LITECOIN (LTC). It is counted in the top five coins. It was released in 2011. Its basic structure is like bitcoin, but there is some important difference. There is a limited supply of LITECOIN similar to Bitcoin. LITECOIN supply is 84 million.
Secondly, LITECOIN block creation time is 2.5 minutes while Bitcoin's block creation time is 10 minutes, although Ethereum block creation time is 25 seconds, and Ripple takes 4 seconds.
RIPPLE (XRP) was designed as a cross-border payment platform so that different financial institutions can use it.
The basic idea of making it is different from bitcoin. Bitcoin was created so that it would stay away from centralized institutions, but Ripple has been made which can also use centralized installations.
Ripple collaborate with big banks such as American Express, Bank of America so that they can use this platform to transfer country-to-country currency in less time and with less cost.
One big issue that will often be seen with cryptocurrency is that the value of these cryptocurrencies is very volatile and keeps going up and down.
Due to this, it becomes very difficult to do financial transactions, if you are sending money from one place to another place, and within 2 days the value of bitcoin has gone down so much, then it will make a big difference in money, then the value of the currency. It is very important to keep stable.
From this region, a new class of cryptocurrencies has been created that offers price stability and a backup from a reserve acid such as US Dollars or gold is called Stable Coins as it is quite stable in price.
Stable coins become popular because you are getting benefits from both sides, you are getting the privacy and security that is available in the cryptocurrency, and the stable value that is in a normal currency is also getting you for that reason.
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