A crypto currency is a digital or virtual currency that is created to be used as a medium of exchange. Following are some of its few features –
- There’s a limit to how many units can exist, with Bitcoin the limit is 21 million.
- Cryptocurrency’s hashing algorithm makes it absolutely easy and convenient to verify the transfer of funds
- Operating independent of any bank or central authority, they work in a decentralised manner.
- New units can be added only after certain conditions set by the system are met. With Bitcoin only after the block is added in the block chain can new Bitcoins be made.
What makes Crypto currency special?
- Little to no transaction cost.
- 24/7 access to money.
- No limit on purchases and withdrawals.
- Freedom of use for everyone
- Fastest method of International transactions.
Cryptography is a method of using encryption and decryption to secure communication in the presence of third parties with ill intent.
Cryptography covers itself with four objectives –
- Confidentiality – The data cannot be understood by anyone.
- Integrity – The data cannot be interfered with or altered in between.
- Non-repudiation – The sender/receiver cannot deny data at a later stage.
- Authentication – Both transactional parties can confirm each other’s identity.
- It also has cons like:
- No guarantee for profits
- For each, its own value: Not all crypto currencies available in the market have the same revenue value.
Paying with Crypto currency
Crypto currency can be used to make a payment However, One must understand properly the differences between paying with crypto currency and paying by traditional methods.
- Different legal protections
- Know your seller
- Fluctuations in the value of refunds
- Public information
Why governments are against crypto currency?
Crypto currency is not issued by a government. The authorities have complete functional control over the Money created by them and supplied to the market by banks,, unlike crypto currency which is completely eliminates the work of third parties or banks.
RBI was adamant about banning the crypto currency because it had lots of risks and concerns about data security and consumer protection and far-reaching potential impact on the effectiveness of monetary policy itself. It was declared as not a legal tender. Crypto currency value fluctuates daily and that makes it very rigid and difficult to be used as a commodity.
Crypto currency system came to improve the way we execute financial transactions in today’s world. And like all the previous systems of the past This system too does have some limitations of its own. But that hasn’t stopped the world from experimenting with investment and transactions in these. It is actively used by various successful businessmen including the likes of Barry Silbert, Dan Morehead, Tyler and Cameron Winklevoss with net worth over ₹1000 crores. Crypto currencies thus have a lot of potential in them. Probably in time we will see them evolving into a new form of transactions overcoming the limitations of the current system.