Cryptocurrencies, regardless of their nomenclature, are highly cryptic in nature. Unlike the usual transactions that require physical denominations, cryptocurrencies work in a very different yet simplified manner. In a nutshell, any transactional form that stores a value and supports liquidation at any given point in time is termed as a cryptocurrency.
According to the well-esteemed Securities and Exchange Commission, Cryptocurrency is also considered a form of security whereas the Financial Crimes Enforcement considers it as a digitized form of currency. However, it isn’t wrong to infer that any form of crypto-specific investment is highly uncertain and volatile, but the pros often outweigh the cons by a deafening margin. Moreover, the lack of regulation is yet another aspect of cryptocurrency that paints a slightly darker picture.
That said, any form of Cryptocurrency is directly related to the Blockchain technology which offers a lot of transactional transparency and unparalleled financial security. One such crypto variant is Bitcoin; a highly popular cryptocurrency with a massive user base, right across the globe.
As mentioned, Bitcoin is probably the most sought-after form of cryptocurrency despite that fact that volatility exists. With the lack of a central authority, Bitcoin is an unregulated entity which is fast turning into the future of financial relevance. To simply put into form, Bitcoin isn’t an actual coin but a mere digital representation of a company’s proposed ICO. Although the concept of ICO is a subject of detailed discussion, at present it is advisable to concentrate more on Bitcoin and its cryptic significance.
This form of cryptocurrency allows international fund transfers with internet at the backdrop. Banking services, Crypto exchanges and even PayPal act as the gatekeepers for keeping a close eye on these transactions. Therefore, a user completely controls the finances with Bitcoin on-board. In simpler words, Bitcoin allows individuals to store and process the money sans back dependency.
Bitcoin is a peer-to-peer transactional entity which kills off intermediaries. However, it is the Blockchain Technology that paves way for Bitcoin’s popularity. That fact that the sender and receiver can interact using nodes and no two nodes are similarly structured, is something that the Blockchain Technology specializes in.
Understanding More About the Blockchain Integration
Basically, it is the Blockchain Technology that drives the entire concept of Cryptocurrency. Bitcoin transactions, for example, use digitized user identities, courtesy the inclusion of Blockchain Technology. Blockchain deploys open source protocols for recording and supervising transactions. As a matter of fact, multiple devices with identical protocols can interact among themselves and exchange details. The aspect of transparency is taken care of by the existing pseudonymous interface of Blockchain that eliminates anonymity from the scheme of things. Blockchain makes sure that every Bitcoin-specific transaction is initiated via digital addresses, letter sequences and unique nodes.
Cryptocurrencies, in that regard, make use of distributed ledger that’s a typical form of blockchain technology. With this technology on-board, the entire transactional database is rendered open to public albeit security measures are in place. This marks the inception of a decentralized version of financial transaction.
How Transactions Typically Work?
Bitcoin transactions are easy to understand and easier to initiate. While purchasing a Bitcoin, the user actually buys a specific password which is a combination of private and public variables. That being said, the public key is more like an address which is known to the individuals sending out the Bitcoin. For example, the Public Key is like a mailbox where anyone can deliver stuffs but only the concerned person can open the same. The private key is more secretive and helps an individual confirm his or her identity while processing a cryptic transaction. Every time a Bitcoin is transferred, the individual uses the private key for signing the fictitious digital contract.
Understanding Bitcoin Mining
Now when we have initiated a detailed discussion regarding Cryptocurrency and Bitcoin, it is important to understand the concept of Mining. Bitcoin Mining is the process where individual computers are deployed for solving complicated mathematical equations. Miners, spread far and wide across the globe, monitor each transaction while reconciling them at every point in time. However, for initiating this process, miners should possess open-source software which allows them to bundle new transactions into unique blocks. These blocks are the basic entities which validate Bitcoin transactions and stored like pages in the Distributed Bitcoin ledger.
The best thing about using Bitcoin is that the process is literally tamper-proof with each block already linked to a preceding one. This makes it impossible for the hackers to decrypt the keys and sabotage transactions. Any ambiguity in a figure terminates the entire transaction. Put simply, miners render their expertise to the Bitcoin environment and are often rewarded in the process.
The Bitcoin Inception
Miners solve the system equations, and, in the process, newer blocks are created. Therefore, every successfully solved equation makes way for a new Bitcoin. Miners also get rewards the frequency of which reduces after every 4 years. The existing Bitcoin limit is 21 million and according to the postulated figures and mining speeds, the saturation limit will reach by the year 2140.
The value of a Bitcoin is actually determined by the overall expectations and the levels of acceptance. In addition to that, the price volatility is mainly caused by the existing or rather presumable regulatory restrictions. With decentralized cryptocurrency transactions banned over certain mediums and even the social platforms putting an end to related adverts, Bitcoin prices have nosedived alarmingly.
Although there are many exchange mediums to rely on, the entire process of Bitcoin purchase is completely irreversible. In addition to that, almost every transaction comes with some overhead costs, charged as a fee. With that being said, the transaction fees are also volatile much like the existing exchange rates. However, the rates are expected to change dramatically once this Cryptocurrency reaches its 21 million saturation limits.
Although majority of us are slowly but steadily emphasizing on Cryptocurrency, preferably Bitcoin, the existing investments must account for only 5 percent of a diversified portfolio. Moreover, the entire Bitcoin investment module is on the riskier side and there are many organizations that are launching privatized ICOs and shelling out tokens based on Blockchain technology. The future, however, looks promising for Cryptocurrency including the likes of Ethereum, Bitcoin etc. as the regulatory authorities are planning to lend a centralized theme to the scheme of things. The next few years are therefore crucial to the existing cryptocurrency module.