In a world of state control and vigilance, people are becoming agonizingly paranoid over what and when things are being watched over. However, a parallel universe has fast been growing which gives users a different experience with a decentralized, non-state regulated and universal currency.
Yes, we do understand you aren’t getting what we are talking about.
In fact, have you heard of the word ‘cryptocurrency’? Sounds fancy, but it may not be. Here is something you might have heard about – bitcoin cryptocurrency (unless you were under a rock for the past 8 years!).
Now that things are picking up, you obviously don’t want to be left behind, right? You want to know what it is and how it functions.
Well, once you finish reading this blog, the basics of understanding the concepts will be in the back of your hand.
Finally, let’s come to the topic and quit beating around the bush.
According to Global Cryptocurrency Benchmarking Study As of April 2017, the combined market value of all cryptocurrencies is $27 billion
Imagine you want to buy something, or make a transaction, but you don’t like the hassle of all the gateways and passwords and all the other stuff regular banks make you do. That is exactly what cryptocurrency is for.
It doesn’t certainly exist in real life, though!!
What happens is, this currency works strictly on a transaction basis. The more people use it, the more money is created. And yes, you can’t even attempt to double spend.
A completely decentralized database is always at work. This means, everybody using the system can view it; unlike regular bank accounts, it is only available to the user.
So, how is that great?
As users use bitcoin with pseudo names, it isn’t exactly a violation of their privacy. Plus, they get to know the details of every transaction in one location.
Lets understand it with example :
If ‘A’ wants to make a transaction with ‘B’, he will have to request a transaction. At this point, A’s request will be broadcast in nodes (computers) that will then use mathematical assistance to check the validity of the said request. Questions like –
“Does A have money to send B?
Has A already used his available currency before?” will be answered.
Once verification is complete, the request will be processed and the data will be added to the decentralized universal balance sheet, also known as the blockchain. The addition of a new block to the chain is pretty much etched in stone. No more changing and finally, the transaction is complete.
Now, who is in charge of keeping things in line or ‘adding blocks to chains’?
People called miners. They are the missing puzzle piece to your question of how cryptocurrency works.
These miners invest in hardware and offer their services to companies for helping them add blocks to the blockchain. In return, companies give them a few coins. But, why is adding blocks so important?
The transactor’s cryptographic key locks a trade once added to the blockchain. This currency is considered so transparent because once a transaction is confirmed and a block is added, there can be no alterations.
So, bitcoin cryptocurrency will keep increasing as more people use it. This literally translates to the more you spend, the more there is.
Is it something that geeks are just going nuts about, or is there a game changer here?
This form of currency could very well be the future.
Remember how we talk about an ideal state in political theory classes where the state doesn’t interfere at all with the private lives of the citizen?
Cryptocurrency takes away the state’s most potent weapon, Money! It only takes disintegration of power to another level.
Users can always access the balance sheet at any time. Due to the balance sheet’s freedom from laws and regulations, the addition of blocks to the chain is invulnerable to change.
Economists believe that only 8% of the world’s total cash is physically available. Everything else is just a blip on the bank’s computer screen.
According to World Payments Report 2017 (WPR) non-cash transactions worldwide reached an all time high of more than 433 billion in 2014-2015, and they show no signs of slowing. WPR estimates global non-cash transactions will experience an additional compound annual growth rate of 10.9% in 2017.
Hugely regulated by governments, normal cash is as virtual as bitcoin.
All of us have bought things online or purchased things with our credit cards. What happens every time we make a purchase request? A gateway guards us against spending our own money.
Before your transaction is complete, you must fill formalities, ids, pins, passwords, and what not, to keep things going.
When you know how cryptocurrency works, all this vanishes. It makes money transfer incredibly fast and doesn’t charge any additional transaction fee.
Also, you don’t need an international card or a PayPal account to start. Simply download the free application on your phone to start sending and receiving money.
Interestingly, cryptocurrency does not depend on regular banking systems to work.
Cash flowing around the world is nothing but the debt the state owes the individual. It is a constant debt cycle going from one person to another. This is primarily why money needs reserves.
Debts and reserves are not a part of the virtual cryptocurrency. That signifies you won’t be seeing sudden charges made to your bank account on some hocus pocus.
Also, like bitcoin, others too schedule their coin issuing process. The supply isn’t unlimited, and that is why, with more use, stakes go higher.
Last but not the least, nobody regulates or incurs taxes on cryptocurrencies. It’s your own money and you can give it to whoever you like or buy whatever you want.
Understanding how cryptocurrency works turned out pretty great, didn’t it?
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