In today’s context, Cryptocurrency is a common topic of conversation amongst the youth. But what is Cryptocurrency? And How does it work? Let’s find it out. Also, we will be talking in-depth about Cryptography and Blockchain Technology.
What Is Cryptocurrency?
Cryptocurrency is simply a digital or electronic form of payment that uses cryptography to secure transactions. In other words, Cryptocurrency is digital decentralized cash based on blockchain technology. There are over 6000 different Cryptocurrencies accepted around the world.
The most popular Cryptocurrency is definitely, Bitcoin. It is denoted by symbols BTC, ฿, and ₿. Currently, the value of 1 Bitcoin is 62,178 USD.
The reasons behind the popularity of Cryptocurrency:
- Traders and Investors around the world see Cryptocurrency as the future. And as a result, the number of buyers is rapidly increasing every day.
- Cryptocurrencies are secured due to the built-in blockchain technology.
- Since there is no involvement of any World Government banks, investors see it as a golden opportunity to protect their wealth.
- With the growth of digitalization all over the world, many companies are accepting cryptocurrency as a method of payment.
- Cryptocurrency transactions are way faster (usually done in minutes) than any other form of money transfer.
Rise And Dominance Of Bitcoin
Every person who uses social media might be familiar with the term Bitcoin. There are many tutorial videos available where people show the process of mining bitcoins.
Bitcoin is a digital currency that relies only on peer-to-peer networks. ₿ is the character used to represent Bitcoin, and the smaller amounts of Bitcoins are called millibitcoin (mBTC). Since it is a decentralized currency, it does not have a central authority. Similarly, anybody can send a transaction without the requirement of approval from higher networks.
As per sources, Nakamoto had mined over one million bitcoins in 2010, just before handing the network alert key and control of the code repository over to the software developer, Gavin Andresen.
In the last decade, Bitcoin has risen to global dominance. The most successful Entrepreneur and the current richest person in the world, Elon Musk, had also his part in the growth of Bitcoin value. In January 2021, he tweeted with the hashtag #Bitcoin on his personal Twitter account in support of cryptocurrencies. Furthermore, within an hour, the price of one bitcoin rose from $32,299 to $37,000.
In early 2021, Elon Musk also announced that Tesla accepts Bitcoin to buy their cars. However, just after 49 days after the announcement, he called off the bitcoin acceptance, stating that mining Cryptocurrency contributes to more consumption of fossil fuels. And as a result, it was becoming a rising cause for climate change.
How Does Cryptography Differ From Cryptocurrency?
Though the terms Cryptography and Cryptocurrency may sound similar, their meanings are much different from one another. A cryptocurrency is a digital form of cash whereas, Cryptography is the study or practice for creating secure communication.
Cryptography is majorly used to create an assured path such that the encrypted data sent by the sender is decrypted by the intended receiver only. The most common applications of Cryptography are banking transactions and e-commerce transactions.
The three major types of Cryptography techniques used are:
1. Symmetric-Key Cryptography
2. Hash Functions
3. Public-Key Cryptography
Symmetric-Key Cryptography:
In Symmetric-Key Cryptography, the primary data is converted to a format that is impossible to read by any intermediate who does not possess the secret key that was initially used to encrypt the data. Furthermore, it is more efficient than asymmetric encryption and therefore used in exchanging larger data. Some popular examples of Symmetric-Key Cryptography are DES, 3DES, and AES.
Hash Functions:
Hash Functions used in Cryptography are mathematical algorithms that map data of fixed length. It uses hash values instead of specific keys and they are also called one-way encryption. It is more complicated to use than other Cryptography methods. Message-Digest Algorithm, Secure Hash Algorithm, and RIPEMD are some of the practical examples of Hash Functions.
Public-Key Cryptography:
Public-Key Cryptography is the just opposite of the Symmetric-Key Cryptography algorithm. It is also called Asyymmteric Cryptography. In Symmetry Key, only one key is used for both encryption and decryption.
But in this method of Cryptography, two keys, one public and the other private key are used. The public key is used for encryption whereas, the private key is used for decryption. Examples: Digital Signature Standard, Pailliercryptosystem, and Cramer–Shoup cryptosystem.
Exploring the Terminology: Blockchain Technology
Blockchain is a specific type of database which is also known as a decentralized and distributed ledger. In addition, it is a system to keep records in a secure manner such that it becomes almost impossible to hack or cheat. It is also referred to as Distributed Ledger Technology (DLT).
Due to blocDue to blockchain technology, ledgers are distributed amongst users allowing real-time access and transparency. It generally contains never-ending blocks that are linked together using Cryptography. Here, once data is recorded on a block it cannot be altered retroactively without altering all the other blocks linked to it.
Key Features Of Blockchain Technology:
- Better Security – Blockchain Technology creates end-to-end encryption between the sender and receiver. This makes the data completely secured and almost impossible to hack.
- Immutability – In programming, an Immutability object is referred to as an object whose state can’t be changed after it is created. The blockchain creates immutable ledgers which record never-ending transactions. And it store the data in real-time.
- Traceability – Traceability can be used to expose weaknesses in any supply chain. Organizations use this feature to trace the origin of services provided by any individual.
- Transparency – As blockchain technology uses distributed ledgers, the same recorded data are available in multiple peer-to-peer networks. This increases transparency and trust.
- Instant Transactions – It is well known that transactions take way longer if there is the involvement of a third party. But not in this case. Blockchain technology enhances transaction execution time which means faster settlements.
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