Guide to printing students – 14
Written by : N.R. Jayaraman
What is Cryptocurrency ?
76) There was an interesting query from a student who was anxious to know what are the Cryptocurrencies, how are they issued, who prints them and how are they different from the Bank Notes, International Currencies, Coins etc. I have given below brief answer to clear his query and for general information as the subject matter of Cryptocurrency is not a legal tender and also deeper subject matter to understand unless they are practiced.
The Cryptocurrencies are not printed Currencies or Bank notes or Coins as authorized and issued by the Central banks or the Govt of a country. They have no physical form though have all the properties and value of the currencies or money as issued by the banks. The Cryptocurrencies are purely private managed Digital currencies in an exchange system. Therefore, the Crypto currencies are not comparable to the printed money in circulation.
A Cryptocurrency is encrypted, decentralized digital currency transferred between peers (traders) through a public ledger in a process known as mining. The Cryptocurrency also called Virtual currency or Electronic cash system and so designed to work as a medium of exchange between traders and has become global phenomenon in the 21st century. The virtual currency, also known as virtual money, is a type of unregulated, digital money, which is issued and usually controlled by its developers and accepted among the members of a specific virtual trading community. Cryptocurrency funds are locked in a public key cryptography system. Only the owner of the private key can send Cryptocurrency.
The digital exchange currency system is operated with interconnected nodes called P2P network (peer-to-peer), which exchange resources amongst member traders without a centralized administrative system. The transactions take place using cryptography for few factors like secure and verify the transactions, to control creation of new units of a particular Cryptocurrency, to control the creation of additional units and finally to verify the transfer of assets.
As said earlier, the Cryptocurrencies which is digital money is available only in digital form and the funds are locked in a system called block chains operatable with a secret key in the cryptography system. Cryptography, a Greek word born out of the need for secure communication in the Second World War with elements of mathematical theory and computer science is based on encryption theory. Cryptography converts the transacted information into unintelligible hidden or secret text. The encryption techniques are meant to control creation of monetary units and to verify the transfer of funds but at the same time it allow instantaneous transactions once the transaction is verified. Hence it is very secure.
Since the Cryptocurrencies have no physical form, it is not redeemable in another commodity like gold. Its supply is also not determined by any central bank or authority and the network is completely decentralized. Like traditional money, these currencies may be used to buy physical goods and services, but may also be restricted to certain communities.
Some of worldwide known Cryptocurrencies are Bitcoin, Ethereum, Ripple, Litecoin, Monero, Altcoins, Namecoin and PPcoin etc. Among them, Bitcoins are seen to be widely known and remain popular. The Cryptocurrencies have a long way to go before they can be accepted as legal digital money and to replace credit cards and traditional currencies as a tool for global commerce.