Confused with Cryptocurrency? Here is a Basic Guide to understand!

By POOJA BISHT |Email | Mar 11, 2019 | 2778 Views

There is a basic confusion over the term Cryptocurrency. In fact, I also had. Also, the fear spread in the recent past of using Bitcoin (which is also a cryptocurrency) at one's own risk has made the term quite complicated and risk-prone.

After learning and researching through various platforms, I have come up with a basic definition to brief you about Cryptocurrency so that the term may not sound like an alien to you. I tried to put it simply so you get the basic idea about it.

Cryptocurrency is basically a digital currency (not confusing with physical currency which we normally use) is used to secure online transactions and uses cryptography for that. It is decentralized in nature.

You can understand cryptography as a technique which makes the transaction secure. Cryptography is the technique by which our private messages are reached securely to only to the receiving party without the interference of any third party. You could take the example of the messages which you send it to your friend and are said to be encrypted (at least, by the government) with no third party having the permission to view those. Decentralized, here, signifies that cryptocurrency is not controlled by any central authority unlike in case of our transactions which are controlled by RBI. 

This makes cryptocurrency quite complex and risky for many people who want to invest in it. 

Bitcoin, with its release in 2009 is the first decentralized cryptocurrency worth Indian rupees 2,71,076.86 (the figure is taken by a recent search from google).

Bitcoins are sent from person to person, without the interference of any third party, which make it different than the other transactions. Each time when you send or receive a Bitcoin, the transactions are recorded in a public ledger known as Blockchain. Blockchains are nothing but the list of records (or transactions) called Blocks.

Ever since Bitcoin has arrived in India, it has gained many headlines regarding its insecurity for usage and higher risks.
Because Bitcoins are not centralized, the Reserve Bank of India, in 2018 gave the statement to discourage the use of Bitcoins in India for any purposes or to invest money in that. The reason is simple. When there is no party to control the entire process and is a peer to peer transaction than the RBI is also helpless to pay the losses if incurred in Bitcoin.

I hope, you must have now got a fairer idea of cryptocurrency. I will try to come up with similar ones in the future to help you gain a deeper insight into cryptocurrencies.

Source: HOB