Photo: The Economic Times

Since man evolved, the currency has become a part of our lives. Before the caveman used the "Barter System". In the barter system, a commodity was exchanged for another commodity. However, the barter system fell out as it had some flaws. Then the modern currency as we know it came into existence. 

In 110 BC, an official currency was minted. In 1250 AD, gold-plated florins were introduced. And in 1600 AD - 1900 AD, the paper currency gained popularity. This is how modern currency came into existence. 

There's a centralized regulatory authority to limit the modern currency. Now imagine the scenario of doing an online transaction. This transaction takes place successfully but there are several ways this could have gone wrong like a technical issue, account hack, or the transfer limit must have exceeded. This is why the future of currency lies with cryptocurrency.

Imagine a transaction between two people in the future. One of them has the bitcoin app and there's a notification asking whether they are ready to transfer 5 Bitcoins. If yes, then processing takes place. All of this happens in a matter of seconds. This in return removes all the flaws of modern banking. There's no limit to the funds which you can transfer, your accounts cannot get hacked and there's no central point of failure.

So, cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit. There are thousands of cryptocurrencies. Cryptocurrency is quite similar to any physical currency, it's just that it does not has any physical embodiment.

Features of Cryptocurrency:

  1. There's a limit to how many units can exist.
  2. Easily verifies the transfer of funds.
  3. Operating independently of a bank.
  4. Working in a decentralized manner.
  5. Allows new units to be added only after certain conditions are met.

So, what makes cryptocurrency so special?

  1. Little to no transaction cost.
  2. 24/7 access to money.
  3. No limits on purchases and withdrawals.
  4. Freedom for anyone to use.
  5. International transactions are faster.

What's the "CRYPTO" in cryptocurrency?

Crypto refers to cryptography. It is a method of using encryption and decryption to secure communication in the presence of third parties with ill intent. Cryptography usually requires a computational algorithm (like SHA256), a public key (that the user shares with everyone), and a private key (which acts as a digital signature of the user).

Now let's talk about a normal bitcoin transaction. First, you have the transaction details. Now, these details who you want to send to and how many bitcoins you want to send. Then it's passed through a hashing algorithm. For Bitcoin, we use the SHA256 algorithm. The outcome which you get is passed through a signature algorithm with the user's private key. This is used to uniquely identify the user. This output is then distributed across the network with the sender's public key. The people who verify the transaction to check whether it’s valid or not are known as MINERS. Now after this is done, the transactions are added to the blockchain where they cannot be changed again.

Now let's talk about the biggest cryptocurrency. Not every crypto coin is good. The top two are Bitcoin and Ether. The similarities between these two are:

  1. They are the biggest and most valuable cryptocurrencies.
  2. Both of them use blockchain and mine currency using proof of work.
  3. Widely used across the globe.

The differences between these two are:

  1. Bitcoin is used to send money to someone. Ether is used as a currency in the Ethereum network.
  2. Bitcoin transactions are manual. Ether transactions are manual or automatic.
  3. Bitcoin is slow. It takes 10 minutes to perform a transaction. Whereas, Ether is fast. It takes about 20 seconds to perform a transaction.
  4. Bitcoin is used as money for real-world transactions. Ether is used to power the Ethereum network and power real-life transactions.
  5. Bitcoin is used for transactions involving goods and services. Ether uses blockchain to create a ledger that triggers a transaction when a condition is met.
  6. Bitcoin uses an algorithm known as SHA256 for hashing. Ethereum uses the Ethash algorithm for hashing.

How to invest in cryptocurrency?

Everything in life involves risk and so does crypto. One needs to have proper knowledge to start investing. The first thing which we need to do is to find a crypto exchange. We need to do a detailed background check. Some of the popular exchanges in India are Wazir X, Coin DCX, and Coin Switch Kuber. The next step is to create an account. Once it gets created, we need to deposit the amount to buy bitcoins. Then pick a crypto coin. And then you can get started.

The Future of Cryptocurrency

Before people used to invest in gold and real estate. With time, the return decreased. It was only after this when cryptocurrency started rising. This digital coin has very fast gained popularity mainly because of the support from billionaire tycoons like Elon Musk, Jack Dorsey, and Michael Novogratz. More and more people are getting drawn towards it especially after the pandemic. It has gotten so high after the COVID happened. Lots of countries printed trillions of dollars. Investors have doubled their amount. However, cryptocurrency is predicted to face a conflict between regulation and anonymity. Futurists believe that by 2030, cryptocurrencies would occupy 25% of national currencies. There have also been demands to classify Bitcoin as an asset class in India. India is currently on the cusp of the next phase of the digital revolution. And blockchain and cryptocurrency will be an integral part of it.