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Cryptocurrency: A Boon or a Bane

Cryptocurrencies... 



 A topic we all love to talk about and the topic we know the least about as basically it is the news nowadays cryptocurrencies news. Well it is bitcoin for most, for some even Ethereum (Ether), but do we actually know since the very start of Bitcoin in 2009, over 7,000 different variants of cryptocurrencies have been created.

 

So, what is this cryptocurrency and why is it a topic to talk about?


Well simply saying cryptocurrency is no different than the form of currency that we use but in the case of cryptocurrency it is not specific to a nation or a continent it can be used anywhere and everywhere through the internet  (might be too early to say that but yeah) , the basic reason for the boom in the cryptocurrency market is due to the fact it is a decentralized currency wherein each and every transaction is stored in a distributed ledger (Blockchain). And there is no central authority governing its issue and transactions.

 

Why and what is the reliability?



Well for most of these cryptocurrencies (Bitcoin, Ethereum, Bitcoin Cash,... 7000 remember; for this context, we will stick to Bitcoin) use a ledger-based system known as Blockchain for verification and data consensus, and the distributed data is backed by cryptography. And the fact that no central entity holding the power or data for any kind of transaction. With the feature of Exchange and Atomic swaps, it is even more convenient to use.


Transaction

For each and every transaction to happen certain standards are to be met which is verified by UTXO (Unspent Transactional Output) these standards include:

  • Proof of ownership: For the very beginning of each transaction there is proof of ownership needed this is basically in the form of private keys or hash to the specific ledger makes the owner of the private key associated with the file in the Blockchain.

 

  • Available Funds: Once the owner is verified now this is a basic as well as a crucial step verifying that the ledger associated with the owner whether it has the specific amount for the transaction or not if yes UTXO moves to the third and the last step and if no the transaction is denied and the process is canceled.  

 

  •  No other transaction using the same fund: This stage is quite a bit technical so basically in this step the system verifies that no two different transactions is happening simultaneously from the same owner.

Now once the UTXO verifies the transaction the data is stored in the ledger in the hash format and then a data consensus takes place by the method of Consensus voting which is one CPU one vote not the one identity one vote, the ledger verifies the legit hash of each transaction and then it is stored through the network without the network even knowing which or whose transaction is it (Cryptography).


 

Cryptocurrency a boom or bane:


Analyzing the growth of cryptocurrencies especially talking about Bitcoins since the beginning in 2009 it has covered a vast journey in a short span of time since the very initial years when its market value was estimated around $0.0008 to $0.08 for a single coin in 2010 to as high as $19,783 per bitcoin in late-2017 and then again averaging around $7,000 as of April 2020 and then again within a few months recently touching its all-time high of $19,860 on November 30, 2020, at a current price of over $19,500 per unit, bitcoin’s market cap today is hovering at around $362 billion dollars so it is no doubt that cryptocurrencies are a big boon with a few ups and downs just as any other currency.


"The big money is not in the buying or selling, but the waiting"

 -Charlie Munger

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