Cryptocurrency is a peer-to-peer virtual digital technology that works on blockchain technology that people can use to transfer money between people.
To understand how cryptocurrencies work, first, we need to determine how they are acquired.
- Since they represent monetary value, they can be acquired by converting common currencies into crypto. The general procedure of acquiring crypto is similar to that of developing stocks in the stock market without taking the influence of the government and banks.
- Mining crypto is the second way to get crypto. There is a public ledger that records all transactions that are facilitated using crypto. The transfer of cryptocurrency involves complex encryption of funds before transmitting, the actual transmission and decryption of funds when received, and personal crypto wallets for all users, among other tasks. This public ledger facilitates all this digital cash movement. Therefore, they require immense processing and computation power to support the system. Since no single organization oversees this process, the infrastructure used to facilitate users provides this. As payment for facilitating these processes, users, or rather “miners,” are compensated in the form of crypto.
One of the most distinct functions of crypto that differentiates it from conventional currencies is that it is not controlled or influenced by any government, banks, or other institutions. Usually, banks are responsible for cashing in cheques and amounts, and they are responsible for ensuring users do not use the amount of money they have already spent. Banks are the only ones who can perform this function; in other words, this function is centralized around banks. In contrast to banks, crypto uses transaction files and private keys to confirm payment and receipt of transactions. Once miners confirm a transaction, this transaction is added to every entity in that crypto. As such, the payer cannot reuse the same funds to someone else since they can see it’s already used, and a receiver can’t deny the receipt since it exists in everyone’s system. This process is swift, and as a result, governments are accepting crypto as a formal currency and allowing its use in the hands of persons, companies, and organizations that can receive this form of money. Also, the government can recognize online auctions that have been paid using crypto to facilitate the transfer of ownership. Some governments are working on their cryptocurrencies to
Transferring currency between countries could be a huge pain and an unnecessary inconvenience, especially during an emergency. Even the specifics of online bank transfer makes the process very tedious. First, they need to determine if the receiver exists, check to see if they can receive the cash since some accounts can be canceled, and currency conversions. They need to schedule the money transfer, among other issues. Well, those who have suffered needlessly at the hands of banks may breathe easier because here is their savior; cryptocurrency. From lightning-fast currency transactions between accounts only taking seconds to no geographical barriers, cryptocurrency makes money transfer faster than sending a text message. On top of this, the system is secure; therefore, users are assured of receiving their money from anywhere, at any time, to anyone, and even without a limit to the amount of currency transactable. Since it is a universal currency, the user doesn’t lose money in conversion, and even better, since fewer people are involved, you are even charged less. Therefore, saying crypto is a far much better option than regular bank transfers is not an exaggeration.
It’s a well-known fact that governments and banks influence the stock market and the values of currencies to generate their income. As such, they prey on people who are trading, taking whatever they have in their accounts. This is not the case for crypto. Since government entities do not control them, they have some sense of value. That said, crypto can be volatile and is easily influenced by people, and since people are a variable factor, it is not a strong enough ground to stand on. However, due to its numerous advantages, crypto has immeasurable value. The security and the convenience it carries with it since you can easily access it makes it a precious commodity, and such commodities with unique perks cannot come cheap, thus explaining why they are so expensive.
Crypto being such a fantastic currency, carries some shortcomings. For example, since it poses serious competition to other currencies, governments are not so keen to facilitate its implementation since it will reduce some government revenue. Also, since the process is very secure and decentralized away from government scope, it may create an avenue for money transfer by criminal organizations. Also, since it is not “moderated” by a government’s GDP growth, it is difficult to predict how such a currency would fluctuate, and one may end up losing the value of their money by a significant amount in just a few days.
Cryptocurrency has the potential for a fast money payment to facilitate emergency surgeries to save someone’s life. Crypto could easily support countries that need food, water, shelter, security, and other basic needs. It could facilitate people to pay for fuel with cryptocurrency. It could facilitate the future generation of children on school trips to pay bets they made in crypto.