With the help of science and technologies, our lives have become easier over time. The rise of digitalization has resulted in a fundamental shift in human lifestyle. Without the introduction of technology such as the internet and computers, none of this would have been possible. Following the onset of the Covid-19 pandemic, digital technologies have grown more common. Cryptocurrency, often known as digital currency, is a hot issue these days. Learn more about cryptocurrencies in the essay given below.
Essay on Cryptocurrency | Paragraph on Cryptocurrency | 900 + Words
Our world today is run by money. Money is the standard medium of exchange of goods whether it be any item or service. We need money to buy daily goods, and commodities and get services. An equivalent amount of money is given for a specific item or any service, It is predetermined. This is how balance takes place in the world. Money mostly comes in physical form, the main trade of money is done physically. Although we use banks and credit cards for monetary exchanges, in the end, the money we have is physical. There was no proper digitalization of money until cryptocurrency was introduced back in 2009.
Cryptocurrency can basically be understood as digital money, or simply internet money. It is the money that has no physical form and is stored / available on the internet. The word “cryptocurrency” comes from the encryption technology used to keep the network safe. This is the reason why making fake digital currencies is almost impossible. In most cases, cryptocurrencies are not issued by a government body. They are decentralized. As they are decentralized, no one actually holds true power over cryptocurrencies, not even a country’s government. Each cryptocurrency works through something called a blockchain, which acts as a distributed ledger where information is stored.
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An online account/wallet is made which acts as a storehouse for cryptocurrencies and can be transferred from one person to another. It is important to know the account’s password in order to transfer funds. Peer-to-peer transactions are encrypted before being sent across a cryptocurrency network. Bitcoin is known as the first decentralized cryptocurrency that was invented in 2009. After that many new cryptocurrencies have risen. Some cryptocurrencies are clones of Bitcoin, while others are new cryptocurrencies built from scratch. Ethereum, Solana, Litecoin, Cardano, Namecoin, Dogecoin, etc are some other popular cryptocurrencies. The combined value of cryptocurrencies crosses trillions.
The circulation of cryptocurrencies takes place all over the world. This is true, especially for bitcoin. Many people have also settled for bitcoin mining as their job and gain bitcoins without having to pay for it. Bitcoin mining is done to obtain bitcoins by a user for a specific mission that they accomplish. This includes doing auditing work and making sure all transactions of bitcoin are transparent and fraudless.
For this task, a powerful computer is required and most bitcoin mining facilities are far away from populated places. Populated places tend to have greater power fees, computers mining bitcoins require a lot of power. By completing the work, the user is awarded bitcoins, and new bitcoins circulate around the system.
Cryptocurrencies are popular due to the numerous advantages that they offer. Cryptocurrencies are encrypted and offer privacy protection. Users can use their private keys to access their own cryptocurrencies in complete privacy. Many cryptocurrency E-wallets come with a private key, which means they can only be evaluated by the owner. These cryptocurrencies can also not be counterfeited. The transaction data is securely kept in blocks with complete privacy and safeguards the user from all forms of fraud and cybercrime.
There is also no need for any kind of third-party involvement during the transactions, which keeps the cost at a minimum. It is safe, fast, and secure. Cryptocurrencies are also not restrained by any country’s exchange rates or transaction fees, they may be utilized abroad without issue. It is environmentally beneficial because it is paperless.
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Cryptocurrencies have their own disadvantages too. Because most individuals do not understand how to use cryptocurrencies, they are exposed to hackers. Cryptocurrencies are notoriously volatile. The major problem is a lack of finances, which means there is no legal formal body to provide guarantees in the event of a bankruptcy. Even in the case of accidental transactions, there is no return of money. Cryptocurrencies work on a “push” system, there is no going back on the money you just spent.
Cryptocurrencies are not governed by anyone, this is why illegal activities like tax fraud, and money laundering can take place. Cryptocurrencies are also not recognized everywhere just yet and transactions cannot take place at such places. A cryptocurrency is very prone to gain or loss in value. A simple comment by an influential person can reduce or raise the price of cryptocurrencies. Countries banning the use of cryptocurrencies, the rise of other competitions, demand, and circulation of cryptocurrencies drastically impact the value of cryptocurrencies.
The pros of cryptocurrencies in the future reside in their ability to provide rapid, secure worldwide transactions as well as complete ownership over our money with cheaper transaction fees than all present currencies. However, considering the dangers posed by the possible use of cryptocurrencies in terrorism financing, money laundering, and tax evasion, the government will need to act quickly.
For now, the main goal of countries should be to try and regulate illegal activities through cryptocurrencies. Governments should try and avoid significant issues by ensuring that cryptocurrencies are not mishandled, and safeguard naïve investors from market instability and potential frauds. However, legislation must be explicit, open, and consistent with a vision that ensures the safety of cryptocurrency investments and transactions. Cryptocurrency trading should be regulated by the government, with strict KYC, reporting, and taxes requirements.