In the age of information technology Digital transactions have become a part of our daily activity. Banking sector of the world is trying to cope with the trend of information technology. As a part of this banks are using digital platforms for transactions for decades. Central Banks of different countries are also trying to make transaction infrastructure for motivating inter-bank or institutional transactions through digital platform.
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Digital currency as a mode of digital transaction is quite new for us. It comes to our mind in 2009 when Satoshi Nakamoto first invented ‘Bitcoin’ as the first Cryptocurrency”. Now more than 10000 Cryptocurrencies are issued by individually and institutionally found operating all over the world. Having the status of the First country in the world on 20 October 2020, Bahama introduces “the Sand Dollar” a legal digital currency, as an alternative to their traditional Bahamian dollar.
What is Cryptocurrency?
Cryptocurrency is a digital or virtual currency used as a digital medium of exchange by using cryptography. Cryptocurrency allows for secure payments by using a virtual “token” as a form of payment used for the exchange of goods and services purchased on a digital platform. Cryptocurrency transactions are verified and “tokens” ledgers are maintained by decentralized networks based on blockchain technology. This technology makes it nearly impossible to counterfeit or double-spend.
Types of Cryptocurrency:
Bitcoin was the first blockchain-based cryptocurrency in the world, which still remains the most popular and most valuable to its stakeholders. Now nearly 10000 cryptocurrency operates in the digital market. Here is an overview of some of the popular and most used cryptocurrencies in the following;
1. Bitcoin
Bitcoin is considered the first cryptocurrency to facilitate digital payments for digitally purchased goods and services using blockchain technology. Bitcoin ledger allows a participant or customer to prove their ownership of the Bitcoin and they can use them for their transection settlement and can help to prevent any fraudulent activities and another unapproved tampering of the currency. Bitcoin technology also allows making peer-to-peer money transfers faster and less expensive than traditional currency. The present market value of Bitcoin is Over $856 billion. (August 2021)
2. Ether (Ethereum)
Ether is the token based on the Ethereum network and also uses blockchain technology to facilitate transactions. Ethereum is a favorite cryptocurrency for program developers because of its applications which enable the creation of smart contracts and other decentralized applications. The present market value of Ethereum is Over $357 billion. (August 2021)
3. Binance Coin
Binance Coin is one of the largest crypto exchanges in the world-first launched in 2017. Binance cryptocurrency exchange platform facilitates tokens that may be accustomed to trading and paying fees on the Binance exchange. The present market value of Binance Coin is Over $70 billion. (August 2021)
4. Cardano (ADA)
Among the existing cryptocurrencies, Cardano is notable for its early embrace of proof-of-stake (A Class of consensus mechanism for blockchains which validates the owner’s proportion of cryptocurrency) validation. Cardano also works similar to Ethereum. It also enables smart contracts and decentralized applications, which are powered by ADA, its native coin. The market capital of Cardano (ADA) is Over $69 billion. (August 2021)
5. Tether
Tether is known as a stablecoin, which means it’s backed by fiat currencies similar to U.S. dollars and the Euro and seems it keeps a value equal to one of those values. The idea of introducing Tether is to combine the benefits of a cryptocurrency with the stability of a normal currency issued by the government authority. Market capital of Tether is Over $64 billion. (August 2021)
6. XRP (Ripple)
XRP is a digital currency that was initially released in 2012 by Ripple, a digital technology and payment processing company. It was designed for financial institutions to scale digital payments across the globe in exchange for different currency types, including fiat currencies and other major cryptocurrencies and reduce transaction costs associated with typical cross-border funds transfers. Market capital of XRP (Ripple) is Over $52 billion. (August 2021)
7. Dogecoin
Dogecoin is a cryptocurrency created by Billy Markus and Jackson Palmer software Engineer of IBM, on December 6, 2013 as a joke, making fun of the wild supposition in cryptocurrencies at the time. Dogecoin also uses Decentralize finance technology for its transactions and maintains the ledger. The market capital of Dogecoin is Over $40 billion. (August 2021
Advantages and Disadvantages of Cryptocurrency
Advantages:
01. Cryptocurrency makes a Basic peer-to-peer type transaction.
02. Cryptocurrencies transfer funds directly between two parties, there is no third party like a bank and financial institution or credit card company to authorize or verify the transaction.
03. Cryptocurrencies have no physical form, it has a digital “Wallet” for their stakeholders.
04. Cryptocurrency transactions are secured by the use of “Public keys” and “private keys” and different kinds of incentive systems, like “Proof of Work” or “Proof of Stake”.
05. Fund transfers are completed with minimum processing fees. And not charge channel fees and other incidental charges like a bank and financial institution or credit card company charges for making a digital transaction.
06. Cryptocurrency technology used blockchain technology which makes the transaction nearly impossible to counterfeit or double-spend.
Disadvantages:
01. Cryptocurrencies are not issued by a Central Bank or government or Currency issuing authority.
02. Cryptocurrency issued by an individual or an organization for that reason you may not get legal support against your transactions.
03. Cryptocurrency transactions tend to be illegal activities, such as money laundering and tax evasion.
04. Possibility of hacking and theft.
How the price of Cryptocurrency is determined?
The basic principle of determining the market prices for cryptocurrency is based on supply and demand. Sometimes, the design of many cryptocurrencies is also responsible for creating a high degree of scarcity which leads to fluctuating the exchange rate of the cryptocurrency with another currency.
Over 300 million users around the world are using Cryptocurrency for making digital transactions but some of the governments announce it illegal. Nearly 33% of people of Nigeria either use or possess cryptocurrency whereas 11% of Switzerland citizen and 6% of US citizens use cryptocurrency. In our country, Bangladesh Bank, the Central Bank of Bangladesh announces that the use of cryptocurrency, holding or trading of cryptocurrency is not allowed in our country and is illegal. (Source: The Daily Star, July 29, 2021)
FAQs:
1. What is Cryptocurrency?
Cryptocurrency is used as a digital form of payment which is used for the exchange of purchasing goods and services digitally as well as through online platforms.
2. Can I transfer Cryptocurrency to my bank account?
It is not possible to transfer your Cryptocurrency amount to your bank account. You can sell them to a person who is interested to purchase Cryptocurrency in exchange for local currency or you can sell them to an exchange house and withdraw money from there.
3. What is a cryptocurrency used for?
Cryptocurrency is mostly used for the settlement of payment of digitally purchased goods and services.
4. How many types of Cryptocurrency are there?
There is more than 10000 Cryptocurrency operating all over the world. Among them the most common and most popular types of cryptocurrency are;
i) Bitcoin.
ii) Ether (Ethereum).
iii) Binance Coin.
iv) Cardano (ADA).
v) Tether.
vi) XRP (Ripple).
vii) Dogecoin.
viii) USD Coin (USDC).
ix) Polkadot (DOT).
x) Solana (SOL).