Digitising the Currency System

Cryptocurrency or crypto has been defined as any kind of digital currency which makes use of cryptography for the purpose of securing transactions. There is no central authority that issues or regulates cryptocurrency. A decentralised system is used for issuing of new units as well as recording the transactions.

A payment system that works digitally, cryptocurrency has been designed in such a way that it does not depend on any banks for the verification of transactions. The system is a peer-to-peer one that permits anyone and from anywhere to receive and also send payments. Unlike physical money that can be carried around and used for exchanges in the real world, cryptocurrency exists in the form of digital entries and the different transactions have their descriptions given in an online database. The funds of cryptocurrency get transferred and the public ledger keeps a record of the transactions. Digital wallets are used for the purpose of storing cryptocurrencies.

Cryptocurrency got its name from the encryption techniques that it uses for the verification of transactions. This implies the fact that advanced level coding is used for the storing and transmission of cryptocurrency in between the digital wallet and the public ledger. The main objective of encryption is to make the transactions safe as well as secure.

Cryptocurrencies are assets that are technology-based and also intangible. The digital wallets are the tools which help in the storage of encryption keys and this gives the owner the link to his or her cryptocurrency and also helps to confirm the very identity of the owner.

There are several risks associated with the use of cryptocurrency. One of them is that they can easily be hacked. Also the storing of cryptocurrencies in digital wallets poses a problem. In case, the digital wallet is lost (it could be the access to the digital wallets or the backups), it implies that the owner loses the entire investment associated with cryptocurrency. Another disadvantage is that cryptocurrencies are stored in digital wallets and they lack the protection that the government provides to the money deposited in bank accounts. The value of cryptocurrency keeps changing so an investment that has a value of thousands of dollars in the present day could have its value reduced to hundreds of dollars.

Despite the risk factors, cryptocurrencies continue to be used today. The most well-known cryptocurrency in use today is bitcoin. Other cryptocurrencies that follow suit are Ethereum, Litecoin and Ripple. The ease with which cryptocurrency can be transferred is a reason as to why cryptocurrencies are being preferred today. Banks and other financial institutions levy heavy charges for maintaining an account, using credit cards. The charges that are applied for the purpose of using cryptocurrencies are comparatively lower and this makes cryptocurrency a perfect choice for different transactions.

The technology of blockchain deserves a mention when dealing with cryptocurrencies. As the name suggests, blockchain refers to a set of blocks that are connected or it also goes by the name of an online ledger. Each block holds a set of transactions and they are verified by the respective members of the network. As per experts, the technology of blockchain holds the capability to serve various industries like for instance the logistics industry.