Cryptocurrency is the future of money. While all of us are pretty comfortable with the traditional concept of money, not everyone knows exactly what cryptocurrency stands for. There are lots of guides available on the Internet. But, we find all of those extremely complicated. There are lots of jargons and technical terms that are used in those guides. Experts may be well-acquainted with such terms. But, they don’t need any guide anyway.
This guide is for the layman, the aam janta and everyone who is curious about cryptocurrency. We believe everyone must be aware of it and understands it. That’s why we have made it so simple that even a child can understand the concept.
The Concept of Money
Money has two forms: physical and virtual. When we have cash, demand drafts and cheques, it’s the physical form. Everything else comes in the virtual form. Your bank balance, credit/debit cards and e-wallets are virtual forms of your money. Similarly, when you digitally invest in an entity, it is also a virtual form because you don’t really touch the bank notes. You just transfer certain digits from one account to another.
What is Cryptocurrency?
Cryptocurrency is digital or virtual money. When you search online, you may see pictures of physical coins for all crypto coins like Bitcoin, Ripple, Ethereum and so on. But, those are merely representative images. Everything is digital, from buying to selling to holding it in your wallet. You can safely keep the physical form of money (often called fiat money) in your wallet or in a chest or a bank. Similarly, you can keep cryptocurrencies in blockchains that are highly encrypted, therefore nearly impossible to be stolen or misplaced.
You may think how people trade on a virtual coin when they can’t see or touch it. Think like this. When you trade in traditional stock exchanges, can you touch or see the shares? You can only do it for the ones you redeem. You can do the same for cryptocurrency. When you convert cryptocurrency to fiat money, you can see it, touch it and even keep it in your pocket.
Investing in Cryptocurrency
It’s like investing in the share market. The basic difference is that, instead of investing in a company, you are investing in a cryptocurrency. Just like a company’s share market price, every cryptocurrency has a price tag against it that goes up and down all the time. The idea is to buy cryptocurrency when the price is low and sell it when the price is high.
The most significant difference between investing in a company’s share and putting your money on a cryptocurrency is that the company’s share cannot be used for any transaction. But, when you have cryptocurrency, you can enjoy various benefits. You can use it to buy lots of things. Recently, Venezuela made an offer to India. It offered a 30 percent discount on crude oil if the mode of transaction is Petro, Venezuela’s own cryptocurrency. We’ll discuss more on what you can do with cryptocurrency later on.
Most Popular Cryptocurrencies
Bitcoin was the first cryptocurrency ever. After Bitcoin became popular, several other cryptocurrencies came in the market. All these are called Altcoins (alternates to bitcoin). While Bitcoin continues to rule the market, there are several others that are hugely popular and are making a great difference in the market. Until December 2017, more than 1300 Altcoins are available in the market.
The cryptomarket is extremely volatile. The prices go up and down like anything. That is why it is highly important to keep a constant watch on the present trading proceedings. Here is the list of rates for the top cryptocurrencies, as of May 11, 2018. As you can see in the following chart, Bitcoin is the most expensive one. You need six lakh sixty thousand Indian rupees to buy one Bitcoin. The least expensive is Dentacoin. You need less than seven paise to buy one Dentacoin.
How To Buy Cryptocurrency In India
There are two ways to buy cryptocurrency in India. The hard way is to do it yourself. If you choose this process, you have to go through a rigorous and complicated trading process. You have to create multiple crypto accounts, keep your computer malware free and use multiple SIM cards and email accounts. You also have to setup the cryptocurrency wallet yourself and secure it accordingly. This process is hugely complicated and recommended only for experts in the business.
The other way is to trust the conventional trading process. The only Indian platform that offers it is NMCCX. This is the only Indian trading platform that follows the traditional trader-broker concept for cryptocurrency exchanges. Here is how it takes place.
Download the NMCCX app and get yourself registered > Create Your e-Wallet > Deposit INR
When you want to buy some cryptocurrency, search for a registered broker. It’s just like booking a cab. Whenever you search for a cab, you get connected with whoever is near your location. Similarly, you’ll get a list of brokers located near your geolocation. Connect with one of them, discuss available rates and buy.
A Few Crypto Terms (Easy Explanations)
Imagine cryptocurrency as electricity and blockchain as wire. Or, imagine cryptocurrency as water and blockchain as water pipes. Just like electricity flows through wire and water flows through pipes from one end to another, Cryptocurrency transactions are done via blockchains. These blockchains are not monitored by any single person or organization. Numerous people around the world (who don’t know each other, therefore don’t trust one another) keep a record of these blockchains, so that there is no discrepancy. The “blocks” of information are kept in order to create the blockchain.
The process of creating new blocks is called mining. Miners (who do mining) keep a record of every crypto-transaction and create new blocks. Make no mistake. The process is extremely complicated. Suppose there is a competition among thousands of people to guess the exact bank balance of Shah Rukh Khan. They are allowed to guess as many times as they want to. Anyone who comes up with the correct answer wins. The process is similar in cryptocurrency. Here, the winner is paid in cryptocurrencies.
When a single group or an individual manages to operate more than 50 percent of a network, it initiates a kind of monopoly. If someone does a “51% attack,” they can stop mining, use the same coins many times and manipulate all transactions.
A fork is created to protect the network for a 51% attack. The development team protects the system from the bug by making substantial changes in the system.
A digital signature is your proof of ownership. This private key verifies that you own certain data. It also proves your ownership of your coins and e-wallets. Unlike your physical signature, these digital signatures are mathematically impossible to guess, therefore completely secure.
Things You Can Buy With Bitcoins
In an ideal country (read Japan): everything. However, things are still pretty new. At this moment, it is possible to buy a lot of things, ranging from burgers to game tickets to Rolex watches. You can also travel the world and fund your education with cryptocurrencies. People have also bought houses and cars with cryptos. However, it is only possible in a few countries. In Japan, almost anything can be purchased with cryptocurrencies. Hopefully, every other country starts following Japan’s futuristic thinking.
Why Some Governments Are Worried
You must understand one thing first. Governments want to regulate the finance of its country. There are some really strong reasons for that. If the government does not regulate it, we can use our money in any way we want to. That’s why there are guidelines, restrictions and regulations for financial transactions. However, the question is: why should we be not allowed to use our money the way we want to? After all, it’s our money. We should decide how we are going to use it. And, that’s the core idea behind cryptocurrency.
Cryptocurrency is not regulated by any single institution. To avoid indiscipline, it is documented by thousands of different people. But, we have absolute freedom to use our cryptocurrencies the way we want to.
Some governments are freaking out because it cannot regulate the cryptocurrency transactions. Some are concerned that crypotocurrencies can be used for illegal activities or even to finance terrorism. At this moment, most of the governments prefer to wait and watch how things go. The more informed governments are about the “future of money,” the easier it will be to get it legalized.
There is no denying the fact that cryptocurrency is going to rule the world economy in the coming days. At this moment, people are skeptic because it’s new. We advise you to be open about it. If you have any doubt, clarify it. Never invest before you know what you are doing. The more informed you are, the safer your trading will be.[The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views and/or the official policy of the website. ]