A cryptocurrency, also known as crypto, is a digital currency that is protected by encryption. It is a relatively new form of currency that operates in a very unique way than the traditional currency. The most basic difference is that it is purely virtual money, which means there are no physical currency coins or notes to carry in your wallet.
Different types of Cryptocurrencies:
Bitcoin was the first type of cryptocurrency. Other cryptocurrencies like Altcoins have been developed after the success of Bitcoin. Bitcoin was created in 2009 by a person or group pseudonym known as “Satoshi Nakamoto.”
The following are the top ten types of cryptocurrencies:
- Bitcoin Cash
Who controls Cryptocurrency?
Cryptocurrency is created in a unique way. Cryptocurrency units are handled by volunteers from all over the world using their computers.
The purpose of a cryptocurrency network is to eliminate the necessity for a central authority. It is not controlled by the central bank and other governments. It is a decentralized design that ensures network control is distributed among multiple “smaller places” rather than concentrated in a “single place.”
Cryptography is critical in allowing users to freely exchange tokens/coins with one another without any need of third parties, such as a bank that tracks each person’s balance and guarantees the network’s security.
How does Cryptocurrency work?
Transaction is initiated by a user or sender who wants to transmit money to another user.
Each transaction is represented as a block in this system. This block is then sent to the blockchain network. That block is verified by the different users of the chain. After it is verified as a valid transaction, it is added to the chain. Each transaction is encrypted and contains a unique set of keys.
What is a Crypto Exchange?
A cryptocurrency exchange is a platform where you can buy and sell cryptocurrencies. The pricing of cryptocurrencies on exchanges is based on current market prices. You can also use an exchange to convert cryptocurrencies into any other currency, which you can retain either as cash in your account or withdrawal to your bank account. Cryptocurrency exchanges allow you to buy, sell, and invest in cryptocurrency online. Binance, Coinbase, Kraken, are some well-known exchanges. Before you start looking at cryptocurrency exchanges, you should have a solid understanding of what they are and how they work.
How to store cryptocurrency?
After purchasing the bitcoin, you need to keep it safe to prevent being hacked or stolen. Cryptocurrencies are typically stored in cryptocurrency wallets, which are hardware devices or online software that securely store the private keys to your cryptocurrencies.
Some exchanges also offer wallet services to store your funds directly on the platform.
Hot wallet and cold wallet are two types of wallets:
- Hot wallet storage: “Hot wallets” refer to crypto storage that encrypts private keys using online software.
- Cold wallet storage: Cold wallets (also known as hardware wallets) store your private keys through your offline electronic devices
Is Cryptocurrency legal in India?
Recently there is no rule or ban in usage of cryptocurrencies in India. The Reserve Bank of India (RBI) ordered banks to stop supporting crypto transactions, which was reversed by the Supreme Court order in March 2020. The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, was introduced in Parliament during the Winter Session, and it aims to prohibit all “private cryptocurrencies” in India. Finance Minister Nirmala Sitharaman proposed a 30% tax on earnings derived from cryptocurrency trading when she presented the Union Budget for the year 2022-23 on Tuesday. The finance minister also stated that by the end of the financial year 2023, the Reserve Bank of India will issue its own digital currency.
Nowadays Cryptocurrency is very trending in the global market. But investors have to take high risks while trading in Cryptocurrency. So it is important for all investors to understand the risk before starting trading.