BEGINNERS GUIDE ABOUT CRYPTO CURRENCIES

 WHAT ARE CRYPTOCURRENCIES?

Crypto currencies are types of virtual or digital type of currencies, which are then converted from any traditional currency into Digital currency. There is bunch of technology behind the regulation of digital currency, but why do we care??, "Who cares about technology, there should be money in my wallet?".

With cryptocurrencies you can get rid of banks and other centralized middlemen altogether. That's because cryptocurrencies rely on a technology called BLOCKCHAIN, which is decentralized (that means no single person is in charge of it). Instead, every computer in the network confirms that the transactions .

Of course, in the old days, when you traded your chicken with shoes, the values of the exchanged materials were inherited to their nature. But when coin, cash, and credit cards came to play, the definition of money and, more importantly, the trust model of money changed. Another key change in money has been its ease of transaction. The hassle of carrying a ton of gold bars from one country to another was one of the main reason cash was invented. Then, when people got more lazier, credit cards were invented. But credit cards carry the money that your government controls. As the world becomes more interconnected and more concerned about authorities who may or may not have people's best interest in mind, cryptocurrencies may offer a valuable alternative.

HISTORY OF CRYPTOCURRENCIES:

The first ever cryptocurrency that was created was BITCOIN. You have probably heard this name more than any name in crypto industry. Bitcoin was the first product of the first blockchain developed by some anonymous entity who went by the name Satoshi Nakamoto. Satoshi released the idea of Bitcoin in 2008 and described it as a "purely peer-to-peer version" of electronic money.

Cryptocurrencies like Bitcoin are created through a process called MINING. Very different than mining ore, mining cryptocurrencies involve powerful  computer solving complicated problems.

KEY CRYPTO BENEFITS:

Still not convinced that cryptocurrencies or any other type of decentralized currency are better solution than traditional government based money? It's benefits are:

REDUCING CORRUPTION: With great power comes great responsibility. But when you give ton of power to only one person or entity, the chances of their abusing that power increases.  The 19th century British politician Lord Acton said it best : "Power tends to corrupt, and absolute power corrupts absolute". Cryptocurrency tend to distribute all the power among many people or better yet among all the members of the network, and that's the key idea behind blockchain technology.

ELIMINATING EXTREME MONEY PRINTING: Governments have central banks and central banks have ability to print money when they are facing serious economic crisis, and this process is called quantitative easing. For example, when a country prints too much money, the value of its currency drops so much that people can't even buy everyday goods and services. Their cash becomes as valuable as a toilet paper.  Most cryptocurrencies have a limited , set amount of coins available. When all those coins in a circulation, a central entity or the company behind the blockchain has no easy way to simple create more coins or add on to its supply.

GIVING PEOPLE CHARGE OF THEIR OWN MONEY: With traditional cash, you're basically giving away your control to central banks and the government. If you trust your government , that's great , but keep in mind that at any point, government is able to freeze your bank account or deny your access to your funds. For examples, in many countries if you don't have legal will or own a business, the government has the right to all you assets if you pass away. Some government can even simple abolish bank notes the way that India did in 2016.

CUTTING OUT THE MIDDLEMAN :  With traditional money, every time you make a transfer, a middleman like you bank or a digital payment service takes  cut. With cryptocurrencies, all the network members in the blockchain are that middleman; their compensation is formulated differently from that of traditional money middlemen's and therefore is minimal comparison.

SERVING THE UBANKED: A vast portion of the world's citizen has no access or limited access to payment systems like banks. Cryptocurrencies aim to resolve this issue by spreading digital commerce around the globe so that anyone with a mobile phone can start making payments. And yes, more people have mobile phones than toilets, but at this point the blockchain technology may not be able to resolve the latter issue.

DRAWBACKS:

SCALABILITY : Probability the biggest concerning with cryptocurrencies are the problems with scaling that are posed. While the number of digital coins and adoption in increasing rapidly, it is still dwarfed by number of transaction that payment is giant , VISA, process every day. Additionally, the speed of a transaction is another metric that cryptocurrencies cannot compete with on the same level as players VISA and MASTERCARD until its infrastructure delivering these technologies is massively scaled. Such an evolution is complex and difficult to do seamlessly(smoothly).

CAN BE USED FOR ILLEGAL PURPOSE: Since the privacy and security of cryptocurrencies transactions are high, its's hard for the government to track down any user by their wallet address or keep tabs on their data. Bitcoin has been used as model of exchanging money in a lot of illegal deals in the past. Cryptocurrencies are also used to convert their illicitly obtained money through clean intermediary, to hide its source.

DATA LOSS CAN COUSE FINANCIAL LOSS: The developers wanted to create virtually untraceable source code, strong hacking defenses, and impenetrable authentication protocols. This would make it safer to put money in cryptocurrencies than physical cash or bank vaults. But if any user looses private key to their wallet , there's no getting it back. The wallet will remain blocked away along with the number of coins inside it. This will lead financial loss.

DECENTRALIZED BUT STILL OPERATED BY SOME ORGANIZATION: The cryptocurrencies are known for its feature of being decentralized. But, the flow and amount of some currencies in the market are still controlled by their creators and some organization. These holders can manipulate the coin for large swings in its price. Even hugely traded coins are susceptible to these manipulation like Bitcoin, whose value double  several times in 2017.

SOME COINS ARE NOT AVAILABLE IN OTHER TRADITIONAL CURRENCY: Some cryptocurrencies can only be traded in one or few traditional currencies. This forces the user to convert these currencies into one of the major currencies, like Bitcoin or Ethereum first and then through other exchanges, to their desired currency. This applies to only to a few cryptocurrencies. By doing these, the extra transaction fees are added in the process, costing unnecessary money.

ADVERSE EFFECT OF MINING OF THE ENVIRONMENT: Mining cryptocurrencies require lot of computational power and electrical input, making it highly energy intensive. Mining Bitcoins requires advanced computers and a lot of energy. It cannot be done on ordinary computers. Major Bitcoin miners are in countries like China that use coal to produce electricity, that has increased China's carbon footprint tremendously. 

SUSPECTIBLE TO HACKS : Although all cryptocurrencies are very secure, exchanges are not that secure. Most exchanges store the wallet Is of users to operate their user ID properly. This data can be stolen by hackers, giving them access to lot of accounts. After getting access, these hackers can easily transfer funds from those accounts. Some exchanges, like Bitfinex or Mt Gox, have been hacked in the past years and Bitcoin has been stolen in thousands and million of US Dollars. Most exchanges are highly secure nowadays , but there is always a potential for another hack. 

NO REFUND OR CANCELLATION POLICY: If there is a dispute between concerning parties, or if someone mistakenly sends funds to wrong wallet address. the coin cannot be retrieved by the sender. This can be used by many people to cheat others out of their money. Since there is no refunds, one can easily be created for a transaction whose products or service they never received.

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