FUNDAMENTAL OF CRYPTOCURRENCY
Shreyash Parmale
Student at Department of Technology, Savitribai Phule Pune University
Cryptocurrency is a type of digital or virtual currency that uses cryptography for security. Unlike traditional fiat currencies issued by central banks or governments, cryptocurrencies are decentralized and usually blockchain-based.
Key Characteristics
1) Decentralization: Most cryptocurrencies are not controlled by any central authority, reducing the risk of manipulation.
2) Security: Cryptographic techniques protect transactions, making them secure against fraud.
3) Transparency: Transactions are recorded on a public ledger (the blockchain), allowing for verification while maintaining user anonymity.
4) Limited Supply: Many cryptocurrencies, like Bitcoin, have a capped supply, which helps to mitigate inflation risks.
How Does It Work?
Blockchain Technology: This is the backbone of cryptocurrencies, functioning as a distributed ledger that records all transactions across a network of computers.
Consensus Mechanisms: To validate transactions, cryptocurrencies use methods like:
1. Proof of Work (PoW): Miners solve complex problems to validate transactions.
2. Proof of Stake (PoS): Validators are chosen based on the number of coins they hold.
Benefits of Cryptocurrency
Cryptocurrencies offer several advantages that are transforming the financial landscape:
1] Decentralization: Reduces reliance on central authorities.
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2] Security: Protects transactions with cryptography.
3] Lower Fees: Offers reduced transaction costs.
4] Fast Transactions: Enables quick processing times.
5]Accessibility: Provides services to unbanked populations.
Major Cryptocurrencies
1) Bitcoin (BTC): The pioneer of cryptocurrencies, often viewed as digital gold.
2) Ethereum (ETH): Known for enabling smart contracts and decentralized applications.
Conclusion
As cryptocurrency continues to gain traction, understanding its fundamentals is crucial for professionals in any industry. Whether you're looking to invest, innovate, or simply stay informed, a solid grasp of cryptocurrency can position you well in the future of finance.
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