The concept of cryptocurrency was coined in 1991. However, the first real implementation was done in 2008 by Nakamoto. The first question arises, what is cryptocurrency. It's a financial setup in which the currency is being transferred between the two parties. In the beginning, problems like double error method arose, though the problem was solved afterward through concepts such as block chain technology. The whole process is governed through the cryptographic algorithms. A set of public and private key is being transferred between the two parties. The detail of each transaction is stored in each block and for each client;a chain of blocks forms the complete list of transaction. All the blocks together form the block chain. These block chains are nothing else but the financial ledger. The power of this new currency transaction system depends upon the power of cryptographic algorithm. With implementation of algorithms like DES, the secrecy of each financial transaction (block chain) has been strengthened. However, still the concept has not been approved by many countries. The data of each block cannot be altered retroactively or without network consensus. The share of cryptocurrency is not that much currently though with time, it is expected to rise.
Some of the features of cryptocurrency are:
• Decentralized
• Distributed
• Public ledger
The most important aspect of cryptocurrencyis the above but technology requires security for effective usage. Problems like double error have occurred in the past though that problem is solved now. The biggest advantage of cryptocurrency is its update feature without touching the central server. Thus, we need to make no changes to the server. Also, the transaction can be done between any two members of the network or three or more.
Thus various advantages that you attain through the cryptocurrency are as below:
• Safe
• Fast
• Reliable
• Accurate
However, the technology has developed though it is not being accepted by all the countries. The biggest sensation in cryptocurrency is the bitcoin. It's being accepted by many countries. Similarly, you can find many more type of cryptocurrency. Each of them uses a unique type of algorithms. All of them, you can learn through the cryptography. It's a vast subject and the application in the form of crypto currency is one of the major breakthroughs of past decade. The use might increase four fold in coming years definitely.
Digital currency is additionally utilized as a part of questionable settings as online illicit businesses, for example, Silk Street. The first Silk Street was closed down in October 2013 and there have been two more forms being used from that point forward. In the year following the underlying shutdown of Silk Street, the quantity of unmistakable dim markets expanded from four to twelve, while the measure of medication postings expanded from 18,000 to 32,000.
Darknet markets exhibit challenges concerning lawfulness. Bitcoins and different types of digital money utilized as a part of dim markets are not obviously or lawfully ordered in all parts of the world. In the U.S., bitcoins are named as "virtual resources". This sort of questionable arrangement puts weight on law authorization offices around the globe to adjust to the moving medication exchange of dim markets
In the early days of its launch in 2009, several thousand bitcoins were used to buy a pizza. Since then, the cryptocurrency's meteoric rise to US$65,000 in April 2021, after its heart-stopping drop in mid-2018 by about 70 percent to around US$6,000, boggles the mind of many people - cyptocurrency investors, traders or just the plain curious who missed the boat.
How it all began
Bear in mind that dissatisfaction with the current financial system gave rise to the development of the digital currency. The development of this cryptocurrency is based on blockchain technology by Satoshi Nakamoto, a pseudonym apparently used by a developer or group of developers.
Notwithstanding the many opinions predicting the death of cryptocurrency, bitcoin's performance has inspired many other digital currencies, especially in recent years. The success with crowdfunding brought on by the blockchain fever also attracted those out to scam the unsuspecting public and this has come to the attention of regulators.
Beyond bitcoin
Bitcoin has inspired the launching of many other digital currencies, There are currently more than 1,000 versions of digital coins or tokens. Not all of them are the same and their values vary greatly, as do their liquidity.
Coins, altcoins and tokens
It would suffice at this point to say there are fine distinctions between coins, altcoins and tokens. Altcoins or alternative coins generally describes other than the pioneering bitcoin, although altcoins like ethereum, litecoin, ripple, dogecoin and dash are regarded as in the 'main' category of coins, meaning they are traded in more cryptocurrency exchanges.
Coins serve as a currency or crypto mining store of value whereas tokens offer asset or utility uses, an example being a blockchain service for supply chain management to validate and track wine products from winery to the consumer.
A point to note is that tokens or coins with low value offer upside opportunities but do not expect similar meteoric increases like bitcoin. Put simply, the lesser known tokens may be easy to buy but may be difficult to sell.
Before getting into a cryptocurrency, start by studying the value proposition and technological considerations viz-a-viz the commercial strategies outlined in the white paper accompanying each initial coin offering or ICO.
For those familiar with stocks and shares, it is not unlike initial public offering or IPO. However, IPOs are issued by companies with tangible assets and a business track record. It is all done within a regulated environment. On the other hand, an ICO is based purely on an idea proposed in a white paper by a business - yet to be in operation and without assets - that is looking for funds to start up.
Unregulated, so buyers beware
'One cannot regulated what is unknown' probably sums up the situation with digital currency. Regulators and regulations are still trying to catch up with cryptocurrencies which are continuously evolving. The golden rule in the crypto space is 'caveat emptor', let the buyer beware.
Some countries are keeping an open mind adopting a hands-off policy for cryptocurrencies and blockchain applications, while keeping an eye on outright scams. Yet there are regulators in other countries more concerned with the cons than pros of digital money. Regulators generally realise the need to strike a balance and some are looking at existing laws on securities to try to have a handle on the many flavours of cryptocurrencies globally.
Digital wallets: The first step
A wallet is essential to get started in cryptocurrency. Think e-banking but minus the protection of the law in the case of virtual currency, so security is the first and last thought in the crypto space.
Wallets are of the digital type. There are two types of wallets.
The choice of wallet depends on the user's preference whether the interest purely in bitcoin or ethereum, as each coin has its own wallet, or you can use a third-party wallet that include security features.
Wallet notes
The cryptocurrency wallet has a public and private key with personal transaction records. The public key includes reference to the cryptocurrency account or address, not unlike the name required for one to receive a cheque payment.
The public key is available for all to see but transactions are confirmed only upon verification and validation based on the consensus mechanism relevant to each cryptocurrency.
The private key can be considered to be the PIN that is commonly used in e-financial transactions. It follows that the user should never divulge the private key to anyone and make back-ups of this data which should be stored offline.
It makes sense to have minimal cryptocurrency in a hot wallet while the bigger amount should be in a cold wallet. Losing the private key is as good as losing your cryptocurrency! The usual precautions about online financial dealings apply, from having strong passwords to being alert to malware and phishing.
Wallet formats
Different types of wallets are available to suit individual preferences.
Crypto exchanges are trading platforms for those interested in virtual currencies. The other options include websites for direct trading between buyers and sellers as well as brokers where there is no 'market' price but it is based on compromise between parties to the transaction.
Hence, there are many crypto exchanges located in various countries but with differing standards of security practices and infrastructure. They range from ones allowing for anonymous registration requiring just email to open an account and start trading. Yet there are others that require users to comply with international identity confirmation, known as Know-Your-Customer, and anti-money laundering (AML) measures.
The choice of crypto exchange depends on the user's preference but anonymous ones may have limitations on the extent of trading allowed or could be subject to sudden new regulations in the country of domicile of the exchange. Minimal administrative procedures with anonymous registration let users start trading quickly while going through KYC and AML processes will take more time.
All crypto trades have to be duly processed and validated which can take from few minutes to few hours, depending on the coins or tokens being transacted and volume of trade. Scalability is known