What Is Cryptocurrency? Making Sense of The Digital Currency

May 26, 2022

The world is rapidly becoming digitalized due to the ever-increasing network speeds and technologies available. Our day to day lives are increasingly affected by rapid digitalization, especially in financial terms. You can find several online payment tools that make paying money easier and faster. Gone are the days when you needed cash for every little and big transaction. Now you can transfer money from anywhere. Any amount. One such technological advancement in digital money transactions is cryptocurrency. If you are not familiar with what is cryptocurrency or how cryptocurrency works, you will get all your answers here.

What Is Cryptocurrency?

Cryptocurrency is an encrypted form of digital currency, although several countries don’t consider it legal tender. Instead of regulations and transfers through financial institutions, the management of cryptos is through digital ledgers or blockchains. These blockchains have all transactions, ownership, transfers, minting, and trading data. So, any transactions you make with cryptocurrency will have solid digital evidence that is fully secure and encrypted. This helps protect your data from the government or any other regulatory board.

David Chaum first introduced cryptocurrency through his initial digital currency named ecash. It was later developed into Digicash, and several following cryptocurrencies used the technology to mint their cryptos. If you have trouble knowing how cryptocurrency works, it is very simple. A cryptocurrency has its blockchain, an encrypted database that records transactions. But there are no links to an individual, so that no one can trace back the crypto to anyone. However, database records with links or addresses link all the transactions made through an individual. This anonymity of the user is the major reason why many governments are against cryptocurrencies. But the same anonymity and security are the major reasons people prefer cryptocurrency over regular currency.

Cryptocurrency Craze in India

Cryptocurrency became a craze in India around the time Bitcoin was launched, which is almost a synonym for cryptocurrency. But since the government introduced several official circulars from 2013 through 2020 banning them, cryptocurrency didn’t have many investors. But in March 2020 budget, the government removed all bans from cryptocurrencies, although it didn’t legalize them. So, purchasing crypto was up to the investor, as was the risk. Since the removal of the ban, several domestic and international cryptocurrency exchanges and trading platforms have been available. These platforms don’t have any registration with the government as equity and commodities trading platforms have through SEBI, NSE, BSE, CDSL, or MCX.

Currently, there are several cryptocurrency investors in India, out of which joined just in 2021. [1] This massive amount of investment within two years is proof of how much people today prefer cryptocurrency. To further understand this craze, you must know the top reasons why people invest in cryptocurrency.

Top Reasons to Invest In Cryptocurrency

Secure

Cryptocurrency is by far the most secure form of currency. It doesn’t have the hassles associated with cash, such as troubles in safekeeping, transportation, transactions, or other physical damages. Cryptos also don’t have the common problems of electronic handling of money. Most electronic money handling and transfers are through banks and financial institutions, with their usage charges. There are also several local government rules regarding limitations in transfer amount, source of money, taxation, and availability of service. But cryptocurrency doesn’t have that problem. All transactions are through blockchains which are accessible around the clock without any hindrance from the rules and regulations of the local government.

Untraceable

Cryptocurrency is almost untraceable. The reason why it is almost untraceable and not fully untraceable is that governments require cryptocurrency exchanges and the best bitcoin casino to obtain the customer’s details to allow permission for cryptos in their respective countries. But even then, any third party cannot know the transactions of an individual; they only get an address gateway. And no one can know the total amount of cryptocurrency units an individual has.

International Trading

Earlier, if you had any international payments, you would have to use international gateways like SWIFT, CBDC, CIPS, SEPA, IBAN, or any other financial gateway linked with banks. These gateways made transactions slow and incentivized. But through cryptocurrency exchanges, you can transfer any units of cryptos easily, rapidly, and securely with low to zero charges. Cryptocurrency is helping people around the world to collaborate by making payments through borders possible.

Now that you know what is cryptocurrency and how it works, you must also consider the precautions while purchasing them. Proper research on the type of cryptocurrency, its current value, its performance over the years, the genuine sources of purchase, and correct methods of transactions is absolutely necessary. The knowledge from the research will help you make correct decisions on this otherwise complex currency substitute. So, if you plan to purchase cryptocurrency for transactions or investments, make sure of its every aspect.