In the last year, bitcoin has jumped from $7000 approx to $40000 approx. So it is important for you to know what is cryptocurrency and why is it important.
Until last year Bitcoin was just something that Warren Buffet resisted and this year it became somewhere of an asset class.
What Is Bitcoin?
To understand what exactly cryptocurrency is, Firstly we need to ask ourselves what is money.
In simple terms Money = value, Money is how we transfer value. Suppose you have done some work for someone then that person owes you something, it has to have some intrinsic value that’s what we basically call money.
As humans, we have given value to different things across time.
The ideal scenario is we all should have a type of currency that should be limited and decentralized.
Means one authority should not control the currency.
No matter what happens to that authority, Money should remain stable. To solve both these problems we have cryptocurrency.
What Is Cryptocurrency?
- Firstly, A cryptocurrency is a form of digital money which means it can be stored on a computer or phone.
- It can be sent from peer to peer with no bank or intermediary.
- Today when you transfer money through net banking or any other platform, Your identity is analyzed and confirmed by a specific bank to make sure that the transaction is legit.
- There is one centralized ledger Because Bitcoin works on blockchain technology.
- If you hold a Bitcoin you will get a public key and a private key.
- A public key is like an E-Mail means you can give it to others so that they can send you bitcoin.
- The private key is like your E-Mail password.
- It protects your bitcoin and should not share this private key with others.
- Also, there is not forgot password option available in bitcoin means if you lose your private key chances are you will be lost your bitcoin forever.
What Are The Advantages Of Cryptocurrency?
Decentralized means nobody controls the currency, there is no centralized authority that can do anything anytime.
2.No Transaction Restrictions
Means nobody decides who gets to transact that currency, it is available to everyone of every nationality.
3.Bitcoin Is Secure
It provides an unalterable record of every transaction made on the network, which means no one can change your transaction.
This means These transactions can be anonymous.
5.Bitcoin Is In Limited Amount
You cannot just print more and more cryptocurrencies, there is a finite amount for example there will always be 21 million bitcoin. that is why people call it digital gold.
Where Does Bitcoin Come From?
New Bitcoins are generated by a comparative and decentralized process called Mining, Mining for crypto is like a digital version of digging for gold.
Miners are usually processing the transaction and are getting rewarded by the network in bitcoin.
Basically, miners use a powerful computer to compete with each other to win bitcoin by solving math puzzles that get harder as more and more try to win it.
How Has Bitcoin Become So Valuable?
Ultimately, If soo many people agree to give something value then automatically it becomes valuable.
People hold things like baseball cards, painting, etc. All of these things are valuable for some reason.
Firstly, Rare things are those which are not easily available, which means if there is a great painting then it cannot be made again it is rare because of which it has some value.
2.Ability To Trade
A valuable thing becomes a way to trade a commodity.
people hold an asset if they think it is tradable, As time goes on more and more companies including tesla are now open to accepting it as payment.
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