What is Cryptocurrency?

Basic Knowledge about cryptocurrency.

So to begin with let’s try to understand the meaning of currency which we already are quite familiar with that is, it is the medium of exchange of goods and services. In simple words, we can say, the money we use in the form of paper or coins is usually issued and controlled by the particular government of the company.

Cryptocurrency is a type of currency that uses digital files as money. These files are created as similar to cryptography. Digital signatures can be used for the security of transactions and let other people check if the transactions are real. Cryptocurrency is a digital asset that is based on a decentralized network which allows its existence beyond the control of government and central authority. It is a type of digital payment system which do not involve any bank statement and anyone can receive or transfer money immediately.

Cryptocurrency and Blockchain Technology.

Blockchain is a technology that enables the existence of cryptocurrency. Blockchain is a database that stores information or data in digital format that cannot be erased or edited. It plays a crucial role in maintaining decentralised records of transactions and generating a sense of trust without involving a third party. As the name Blockchain suggests, it stores information in the form of blocks that have fixed storage capacities. Once a block gets filled it stores the rest of the information in a new block and link it to the previous block and thus forming a link. Whenever a piece of new information is added it gets stored in a block and gets chained together with stored data. Blockchain plays a crucial role in operating cryptocurrency but its method of securely storing and transferring information has wider applications outside of cryptocurrency.

How does Cryptocurrency gain value?

Similar to Fiat currency, cryptocurrency is also not backed by gold or silver hence it does not hold any intrinsic value. The value of any currency comes from the backing of the state and the trust that people have over the government. Cryptocurrency gains its value only by the quantity or scale of community involvement. When the demand for a particular cryptocurrency is higher than its supply, the value of that particular currency by default increases. When the cryptocurrency proves to be useful, people try to own more of it and hence increasing the demand and the value.

This was all about today’s article and if you found it useful you can stay in touch and find more information about bitcoin and other cryptocurrencies and how would you make investments etc. in the upcoming articles. Thank you for reading.