Cryptocurrency is a digital asset that is primarily used as a means of transaction to secure financial transactions, control the generation of additional assets, and verify the transfer of any assets with the help of a powerful cryptographic technology. It is also known as a digital or virtual form of currency. Unlike central banking systems, it is a decentralized control and financial transaction system that operates primarily through a blockchain used for financial transactions.
The first decentralized virtual currency to be developed in 2009 is Bitcoin, known as a virtual currency unit and operating independently without the support of a central bank or administrator. Since then, about 4000 altcoins of different bitcoin variants have been developed. Bitcoin is considered as an electronic peer-to-peer cash register system where users make transactions directly without intermediaries.
Blockchain is a multi-block data file that stores records of all previous bitcoin transactions and also creates new ones. The average normal time between each block is about 10 minutes. The most common use of Bitcoin is supported by an external software called Bitcoin wallet. Using this software, the transaction of bitcoin units can be easily saved, received and managed. To make transactions using Bitcoin, you must have an account on any bitcoin exchange around the world and transfer fiat currency to that account. This way, the account holder can make future transactions using these funds. In addition to bitcoin, other sources of cryptocurrency are petroleum, which is used for oil and mineral reserves.
There are pros and cons to using digital currency. The main advantages of using virtual currency are:
• Provides a quick layer of transparency: –
Bitcoin usually works with the help of a book called Blockchain, which records and controls each transaction. Once a transaction is made and recorded in this notebook, it is considered static. These transactions can be verified at any time in the future and, in addition to this, it also guarantees security and privacy regarding all transactions made through a particular account.
• Fast processing and portable use: –
Millions of dollars of bitcoin can be easily transferred from one location to another without any detection with the help of a single memory unit. While any type of transaction is taking place, the involvement of any third party can be eliminated using this bitcoin technology. This will be a quick and easy transaction without the permission of a third party,
• Low transaction costs involved: –
The transaction costs involved in exchanging these digital currencies are much lower, which is cheaper than the actual currency of the world’s population. Therefore, the cost of any transaction made is much lower, and is a beneficial feature of the population every time a transaction is being made.
• Fighting and eradicating poverty: –
Often banking systems and financial institutions do not provide support or assistance to the backward classes in rural areas in particular. Bitcoin serves as an alternative in cases where it extends its robust financial services to anyone with Internet access. It often serves as a support for the poor and oppressed classes who are not provided with a viable alternative in most cases.
As new or newer technology arrives, there are also some negative factors related to its use, such as: –
• Lack of knowledge and distrust of the population: –
Due to the lack of knowledge about digital currency, more people are more likely to become distrustful of its widespread use. Therefore, there are few business systems that support these cryptocurrency sources, thus limiting business systems that prefer to use virtual currency in day-to-day transactions.
• Traceable transactions: –
Because transactions made by Bitcoin are undetectable, it provides a place for criminal transactions. In such cases, it is the drug dealers and strict people who use this virtual currency so that their illegal activities are not easily detected.
• Volatile nature and uncertainty: –
It is sometimes variable in cryptocurrencies and continues to change frequently on a large scale. Sometimes people make a considerable amount of money when the market rates for these virtual currencies go up and sometimes they even suffer big losses when the price goes down.
Cryptocurrency is an innovative but amateur concept that can potentially disrupt the entire financial market. It is true that this digital currency has gained the attention of the world in a short time. There are always benefits and drawbacks to all the new technologies that are emerging in the market. To make the best use of it, both sides need to be examined before decisions can be made.