What is Cryptocurrency?

What is Cryptocurrency?

Currency is money that is typically issued by governments in the form of bills and coins. The bills and coins by themselves do not hold any value, however, the respective government’s promise to pay gives the currency its value.

In 2021, the total cryptocurrency market cap is over $1.57 Trillion.

Normal currency is accepted only within the jurisdiction of the government that has issued the currency and is used in the trade of goods and services. The issuing government controls the supply of the currency and therefore factors such as inflation, conversion rate and bond yield are directly dependent on the government.

Since currencies are controlled by sovereign governments, they benefit from good governance and are negatively impacted. when governments collapse.

How is cryptocurrency different from normal currency?

Cryptocurrency is native internet money that is not controlled by any sovereign government. It can be seamlessly transferred to different geographies via the blockchain.

Normal currencies are backed by sovereign governments and are prone to manipulation based on geo political conditions.

The current monetary system consists of intermediaries like banks and other financial entities that participate in any currency transfer transaction. This results significant transaction costs and time delays during money transfer. One of the biggest advantages of blockchain is that it completely removes the need of any intermediaries during a transfer thereby reducing transaction costs and enabling speedy transfers.

Key Differences
  • Speedy transactions
  • Not controlled by a single entity (Decentralized)
  • Low transaction costs
  • Privacy

The promise of a speedy, low transaction cost alternative to traditional currencies make the cryptocurrency a very attractive alternative.

What are the features of cryptocurrency?

Cryptocurrencies are digital or virtual currencies that are made possible by the Blockchain technology. The blockchain maintains a decentralized ledger and utilizes Cryptography to execute the cryptocurrency transactions.

Benefits of cryptocurrencies

The decentralized nature of cryptocurrencies make them truly independent money that cannot be controlled or manipulated. Cryptocurrencies also offer safe and speedy transactions with very low transaction costs.

Uses of Cryptocurrency:
  • Store of value
  • Buy goods and services
  • Accept payments
  • Investment vehicle

Decentralized finance is the branch of finance that offers several financial services applications using blockchain technologies and cryptocurrencies.

Blockchain and Cryptocurrency

Blockchain is a network of computers, called nodes, that utilize the Cryptography technology to execute transactions. Each blockchain has a unique cryptocurrency that is used in the transaction. Blockchains use either the proof of work or the proof of stake algorithms to validate the cryptocurrency transactions. The Bitcoin and the Ethereum blockchains are the 2 leading blockchains backed by the Bitcoin and Ethereum cryptocurrencies respectively.

List of top cryptocurrencies

There are more than 4000 cryptocurrencies as of 2021 that are used in several industries like Financial Services, Gaming, Healthcare and Real Estate.

  1. Bitcoin
  2. Ethereum
  3. Litecoin
  4. Chainlink

In 2021, the Bitcoin market cap hit $1 Trillion and the combined market cap of all cryptocurrencies is at $$1.57. The market is still very young and growing with several exciting possibilities.