Cryptocurrency is a type of technology that functions as a medium for facilitating safe and secure financial transactions. It is one of the tradable digital forms of money that allows a person to send or receive money from another party without any meddling from an intermediary or formal financial institution.
While bitcoin is the market leader, cryptocurrencies such as bitcoin gold, bitcoin cash, ether, litecoin, ripple, EOS, and NEO may pose a threat in the future due to increased demand, expanding applications, and technological advancements.
Obviously, being from the same family, they have some things in common. Read on to know more about the various cryptocurrencies and their existing commonalities.
1. Available in the Digital Universe
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All cryptocurrencies, including Bitcoin, are only accessible via the internet. The money can be viewed on any computer or mobile device that has internet access.
This currency does not have a tangible form like other currencies. The cryptocurrency does not have the same tactile sensation as cash. It must be kept in digital wallets, which are software programs that allow you to transfer and receive bitcoins and other cryptocurrencies.
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2. Lack of Central Authority and Decentralization
Banks and central authorities control the financial system when it comes to fiat currencies. All cryptocurrencies, on the other hand, have open and dispersed networks that process and validate every transaction occurring in the digital space. Unlike these governments, most cryptocurrencies do not have a central server that is connected to global computer networks (nodes).
The network nodes correctly verify these transactions using encryption, and they are stored in a public distributed ledger known as a blockchain. In fact, the transaction is present across a peer-to-peer network and is repeated on each and every node, allowing it to reach a huge percentage of system nodes in seconds.
3. Anonymity and Safety are Guaranteed
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Users are not required to identify themselves because there is no central authority to regulate cryptocurrencies. A network can check out a transaction request whenever it receives the solicitation. Another similarity between Cryptocurrencies is that they employ both a private key and public key mechanism to authenticate all transactions.
This means that individuals can create digital identities that are completely anonymous. In order to transact on the decentralized system, digital wallets are required. In addition, you must be able to validate transactions in a secure manner.
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4. Irreversible as well as Immutable
Cryptocurrency transactions are unalterable and irreversible. As a result, anyone other than the owner of a private key will be unable to execute the transaction. Moreover, once a transaction is recorded on a blockchain, it cannot be changed. It becomes impossible to change the nature of the transaction once you have executed it. Any form of alteration is difficult with secure encryption because a majority of nodes in the blockchain must change hands for information.
5. Anonymous Transactions
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All cryptocurrency transactions are done anonymously on the blockchain ledger. It implies that senders and receivers each have their own set of characters (public key), which they use to send and receive money without knowing who holds the public key.
Consider this: if you want to donate to a charity that accepts Bitcoin, you can send money to them anonymously. You may track the transaction using the transaction ID to see when they receive it.
6. Scarcity and Limited Supply
Fiat currencies (such as dollars and euros) have an infinite supply because central banks can print as much as they wish. As part of their economic plans, central banks frequently alter the value of their countries’ currencies.
Most governments control their currencies to make them inflationary over time. Because fiat currencies are inherently inflationary, their value will depreciate over time. As a result, holders of fiat currencies may pay the expense of depreciation as well as the risk of currency manipulation.
Most cryptocurrencies, on the other hand, have a finite and predetermined supply that is built into the underlying algorithm when the cryptocurrency is formed. Bitcoin, for example, has a maximum supply of 21 million coins, after which no further coins may be produced. Cryptocurrency generates scarcity on purpose to prevent currency manipulation and depreciation over time.
7. Blockchain technology
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All cryptocurrencies rely on blockchain technology to operate. The decentralized, public ledger or list of transactions for a cryptocurrency is known as a blockchain. The blockchain records and adds completed blocks, which include the most recent transactions.
As an open, permanent, and verifiable record, they are stored in chronological sequence. Blockchains are managed by a peer-to-peer network of market players that use a standard protocol for certifying new blocks. The blockchain is automatically downloaded by each ‘node,’ or computer linked to the network. This eliminates the need for centralized recordkeeping and allows everyone to keep track of transactions.
Blockchain technology creates a record that can’t be modified unless the rest of the network agrees. Satoshi Nakamoto, the creator of bitcoin, is credited with inventing the blockchain concept. Beyond digital cash and currency, this concept has inspired a variety of other applications.
8. Advanced Encryption
Advanced encryption is used in a variety of ways by cryptocurrency. By far cryptocurrency is the most secure method of executing transactions. However, you may wonder how the interests of the public involved in cryptocurrency trading are protected? Yes, you are right, it is through immaculate encryption. Once you have stored your private keys in a wallet, on a thumb drive, it is protected for life and no one, even the most brilliant coders cannot break the encrypted wall.
Conclusion
The easiest way to characterize Bitcoin and other cryptocurrencies is to call them the future of digital transactions. Cryptocurrencies are being questioned as to whether they are part of a financial bubble. However, each and every cryptocurrency has something in common with the forefather BITCOIN.
