2. Cryptocurrency
• Cryptocurrency is a form of digital money that is designed to be secure
and, in many cases, anonymous.
• It is a currency associated with the internet that uses cryptography, the
process of converting legible information into an almost uncrackable
code, to track purchases and transfers.
• The first cryptocurrency was bitcoin, which was created in 2009 and is
still the best known.
4. Core differences between digital currency and
cryptocurrency
• Though cryptocurrency is a type of digital currency, there are some fundamental
differences.
• Structure: Digital currencies are centralized; there is a group of people and
computers that regulates the state of the transactions in the network.
Cryptocurrencies are decentralized, and the regulations are made by the majority
of the community.
• Anonymity: Digital currencies require user identification. You’ll need to upload a
photo of yourself and some documents issued by the public authorities. Buying,
investing and any other processes with cryptocurrencies do not need require any of
that. Nevertheless, cryptocurrencies are not fully anonymous. Though the
addresses don’t contain any confidential information such as name, residential
address, etc., each transaction is registered, the senders and the receivers are
publicly known. Thus, all the transactions are tracked.
5. • Transparency: Digital currencies are not transparent. You cannot choose
the address of the wallet and see all the money transfers. This
information is confidential. Cryptocurrencies are transparent. Everyone
can see any transactions of any user, since all the revenue streams are
placed in a public chain.
• Transaction manipulation: Digital currencies have a central authority
that deals with issues. It can cancel or freeze transactions upon the
request of the participant or authorities or on suspicion of fraud or
money-laundering. Cryptocurrencies are regulated by the community.
It’s very unlikely that the users will approve the changes in the
Blockchain, although there were some precedents such as the hack of
The DAO. However, the amount of money was significant, and the
decision was uncertain.
• Legal aspects: Most countries have some legal framework for digital
currencies.
6.
7. Bitcoin
• The Bitcoin protocol enables peer-to-peer (P2P) exchange in a
decentralized system that, unlike conventional currencies, is not
associated with any financial institution or government.
• Bitcoin-to-Bitcoin transactions are conducted through anonymous,
heavily encrypted hash codes across a peer-to-peer network.
• Each user’s digital wallet maintains their Bitcoins. The wallet also
stores all addresses the user sends and receives Bitcoins from, along
with a private key known only to the user. The P2P network monitors
and verifies Bitcoin transfers.
8. The 6 Most Important Cryptocurrencies Other
Than Bitcoin
• Litcoin (launched in year 2011)
• Ethereum (ETH-launched in 2015)
• Zcash (ZEC-launched in the latter part of 2016)
• Dash (Darkcoin-launched in January 2014)
• Ripple (XRP-released in 2012)
• Monero (XMR-launched in 2014)
9. First legal Indian cryptocurrency
• Laxmicoin is a digital cryptocurrency created by Raj Dangi and Silicon
Valley-based Mitts Daki.
• As per the founders, Laxmicoin is expected to have a total coin
supply of 30 million that will use blockchain technology to function
similar to Bitcoin.
• Originally launched in 2012, Laxmicoin has been stuck in the legal
quagmire entrapping several non-fiat currencies around the world.
• A fiat currency is any currency that has no intrinsic physical value, but
whose value is established by government decree.
• For example, most national currencies around the world, including the
Rupee and the Dollar, are fiat currencies as their values are dictated by
the government.
10. How Cryptocurrencies Work
• A cryptocurrency runs on a blockchain, which is a shared ledger or
document duplicated several times across a network of computers. The
updated document is distributed and made available to all holders of the
cryptocurrency.
• Every single transaction made and the ownership of every single
cryptocurrency in circulation is recorded in the blockchain.
• The blockchain is run by miners, who use powerful computers that tally
the transactions. Their function is to update each time a transaction is
made and also ensure the authenticity of information, thereby
ascertaining that each transaction is secure and is processed properly
and safely.
11.
12. Mining
• Cryptocurrency mining includes two functions, namely: adding
transactions to the blockchain (securing and verifying) and also
releasing new currency.Individual blocks added by miners should
contain a proof-of-work, or PoW.
• Mining needs a computer and a special program, which helps miners
compete with their peers in solving complicated mathematical
problems. This would need huge computer resources. In regular
intervals, miners would attempt to solve a block having the transaction
data using cryptographic hash functions.
14. Cryptocurrency mining limits
• In practice, this means that miners are competing against each other to
calculate as many hashes as possible, in the hopes of getting to be the
first one to hit the correct one, form a block and get their
cryptocurrency payout.
• The difficulty of calculating the hashes also scales - every new block of
bitcoins becomes harder to mine. In theory, this ensures that the rate at
which new blocks are created remains steady. Many cryptocurrencies
also have a finite limit on the amount of units that can ever be
generated. For example, there will only ever be 21 million Bitcoins in
the world. After that, mining a new block will not generate any bitcoins
at all.
15. Cryptocurrency mining requirements
• While it used to be possible to mine your own cryptocurrencies using a
regular PC, for the most part that is no longer the case. As more people
start mining, the hardware necessary to mine effectively increases; from
a moderately-powerful processor, to a high-end GPU, to several GPUs
working together, to specialised chips designed specifically for mining.
• In order to successfully mine most modern cryptocurrencies, you'll need
to spend at least £1,000 on hardware, as well as footing the substantial
electricity bill that having it running 24/7 will generate. In fact, most
miners spend the vast majority of their mining income on covering the
costs of running their equipment.
16. Cryptocurrency Pro
• Cryptocurrency is transparent
• Inflation is unlikely
• Portability
• You control your money
• Transactions cannot be traced
17. Cryptocurrency Cons
• Several people don’t understand it and so are mistrustful of it.
• Cannot be recovered if lost.
• Transactions made with cryptocurrency cannot be traced
• It is subject to market fluctuations
18. Conclusion
• Cryptocurrency is an impressive technical achievement, but it remains a
monetary experiment. Even if cryptocurrencies survive, they may not
fully displace fiat currency.
• They provide an interesting new perspective from which to view
economic questions surrounding currency governance, the
characteristics of money, the political economy of financial
intermediaries, and the nature of currency competition.
