What is cryptocurrency?

Cryptocurrency

Since the beginning of Human civilization, currency has been an integral part of our lives. In caveman era, Barter system was used, but the system lost its impact when few of its flaws came to light. Flaws like:

• Coincide of peoples requirements.
• There is no common measure of value.
• Not all goods can be divided or subdivided like animals.
• Goods cannot be transported easily.

As people realized Barter system was not up to the mark, currency went through few iterations and modern currency as we know it, came into existence. 

1. In 110 BC , an official currency was minted.
2. In 1250 AD, Gold plated florins were introduced and used all across the Europe.
3. In 100 AD-1900 AD, paper currency gained widespread popularity and used across the world.

This is how modern currencies came into existence. This includes paper currency and coins, credit cards and digital wallets like Apple pay, PayPal, PayTm etc which are controlled by banks and Governments. This means there was centralized regulatory authority. Now imagine a scenario of a successful online transaction. Although this transaction was successful, there are several ways this could have gone wrong.

• A technical issue on the bank; system down, machines not working properly etc
• The users accounts were hacked; identity theft,  DDOS  attack etc
• The transfer limits for the account were exceeded.

And that's why the future of currency lies with cryptocurrency. 

Cryptocurrency

Let us imagine a transaction between two people in the future. One of them has Bitcoin app and there is a notification asking whether they sure they are ready to transfer  five bitcoins. If yes, processing takes place; authenticating  the users identity, checking whether they have required balance to make that transaction and other things. After that payment is transferred and payment is received. All of this happens in matter of minutes and is as simple as that. This, in turn removes all the problems of modern banking; there's no limit to fund you can transfer, your account can't be hacked and there is no central point of failure. A present there are many cryptocurrency available Bitcoin, Dodge coin, Ethereum, Dash coin, NEO, EOS, Ripple, etc and a new cryptocurrency crops out every single day.

Cryptocurrencies

What exactly is cryptocurrency ?

A cryptocurrency is a digital or virtual currency that is meant to be a medium of exchange. It is quite similar to the real world currency just that it does not have any physical embodiment. It is a decentralized currency without any central authority. It also uses cryptography to work the way it does. Some features of cryptocurrency:

1. There is a limit to how many units can exist. With Bitcoin this limit exists at 21 million and after that no more bitcoins will be produced.
2. Easily verifies the transfer of funds.
3. Operation independent of bank or central authority.
4. Allows new units to be added only after certain conditions are meet. For instance, for Bitcoin only after block has been added to the blockchain will the minor be awarded with Bitcoin and this is the way new bitcoins can be generated.

What makes cryptocurrency so special?

• Little or no transaction cost: you might have witnessed some balance is deducted from your account while doing an online transaction.
• 24/7 access to the money: You cannot just walk up to the bank at 3 am in the morning and claim to withdraw some money.
• No limits on purchase and withdraw.
• Freedom for anyone to use: If you are setting up an account in bank, you need to complete some paper work and documentation which can be avoided in cryptocurrency.
• International transactions are faster.

'Crypto' in cryptocurrency refers to cryptography which is the method of using encryption and decryption to secure communication in the presence of  third parties with ill intent. This refers to the third party who wants to steal your data. Cryptography uses computational algorithms like SHA-256, a public key (user shares this to everyone) and a private key ( which acts as the digital signature of the user). 

How do you obtain cryptocurrency?

There are three ways to obtain any form of cryptocurrency:

• You can exchange any traditional currency for cryptocurrency by trading with individuals or exchanges.
  
• You can barter cryptocurrency for services or products, like on the nefarious website Silk Road.
• You also can mine them.

Future of cryptocurrencies

The whole world is apparently divided when it comes to cryptocurrency. On one hand there are supporters like Bill Gates, Al Gore and Richard Branson who says cryptocurrency is better than printed currency, On the other hand we have people like Warren Buffet, Paul Krugman and Richard Schiller who are against it. They call it a Ponzi scheme and means for criminal activity. There is going to be a conflict between regulation and anonymity. Since several cryptocurrencies are linked with terrorist attack,  Government wold want to regulate how cryptocurrencies work. On the other hand the main emphasis of cryptocurrency is to ensure that their users are kept anonymous. By the year 2030, cryptocurrencies would occupy 25% of the national economy due to more acceptance by merchants and costumers in the future. Cryptocurrency would continue to have a volatile nature and the price would keep fluctuating as there is no any central authority.

What about cryptocurrency in Nepal?

According to Nepal Rastra Bank Act and the 2019 Foreign Exchange Regulation Act, Nepal Rastra Bank has officially declared Bitcoin and other currencies as illegal forms of financial tender. In 2017, the Central Investigation Bureau even arrested two individuals for running Bitcoin mining and exchange operations.