Since the launch of bitcoin the first cryptocurrency in 2009, the digital market has been revolutionized by these cryptocurrencies. Every year we see several new cryptocurrencies being launched in the digital market. So what are these cryptocurrencies and how do they work?
Cryptocurrencies can be defined as digital assets that you can exchange or use for financial purposes. These cryptocurrencies use blockchain technology which enables them to decentralize the complete control of the currency.
These cryptocurrencies work outside any government body and are exchanged or traded over the internet only. There are several ways in which you can exchange or trade these cryptocurrencies. For these automatisiert exchanges or trade, you are charged by your service provider a certain amount that is in accordance with your exchange amount.
There are basically four ways in which you can use these cryptocurrencies:
This is the most common and the simplest way through which you can exchange your cryptocurrency online. These online exchange platforms allow you to exchange your cryptocurrencies with other assets. You just have to pay some transaction fees.
First launched in the US in 2014, these bitcoin ATMs allowed you to get money in exchange for your cryptocurrency namely bitcoins. You just need an identification document to verify your identity and these ATMs will give you complete access to your online cryptocurrency wallet.
- Atomic Swaps
When you exchange any cryptocurrency with another, this process of exchange is known as an atomic swap. These transactions do not require any intermediaries such as banks as well.
- Initial Coin Offering
ICOs are the most controversial ways of raising bitcoins used by companies that are trying to start any business venture using bitcoins or any other cryptocurrency.
Cryptocurrencies are designed in such a way that they use strong cryptographic codes for secure and safe transactions. In addition to that, they use blockchain technology which allows the user to make all the transactions without any third party services. This blockchain technology also provides the user with a decentralized experience as all the data that is stored in the blocks of the blockchain is directly shared with all the members of the network. All the members have access to this data and they can add more blocks of data to the blockchain as well. There are miners who provide computational powers to the blockchain network in order to verify and process any of the transactions. In return, they are rewarded with bitcoins or any other form of cryptocurrency for their work.
This is what makes cryptocurrencies completely decentralized. As all the data is shared over the network and this data can not be altered or changed once added makes cryptocurrencies more stable and reliable than any of the banking services. With the introduction of several new cryptocurrencies like Ethereum and Ripple users can even customize all of these services according to their requirements as well. These new cryptocurrencies offer much faster transaction rates and high customizable interfaces making them more useful for private businesses.
However, there are several downsides to these cryptocurrencies as well, all the cryptocurrencies are globally criticized for being quite ambiguous. As there is no control of the government over any of the cryptocurrencies, they are often used for funding illegal activities and for money laundering as well.