What is Cryptocurrency?
Cryptocurrencies are digital currencies with no physical form. Neither a coin nor a bill. There is an innovative idea of Decentralization behind these currencies.
All the currencies around the world are regulated by the government. There is an authority that controls those currencies like the RBI of India. Cryptocurrencies work on the opposite idea, i.e., having no authority or a centralized power.
This is why more people are inclining towards investing in cryptocurrencies. You can use these to grow your money, make online purchases, regulate online transactions, etc. If you worry about the security of your wallet and transactions, then rest assured.
Cryptocurrencies are secured by cryptography and are nearly impossible to be counterfeited.
How does Cryptocurrency work?
As I mentioned, cryptocurrencies are not controlled by a central authority. Since these are decentralized, cryptos run through computers and servers. The exchange happens via peer-to-peer servers where no middleman is required.
This makes a cryptocurrency utterly void of any authority. Neither any bank nor any government has the power to impact its circulation of value. However, a government can ban its usage across the country. You know what I mean, don’t you?
However, coming back to the topic - Cryptocurrency works on a distributed ledger which we call Blockchain. This ledger stores all the information regarding transactions, holders, etc.
The cryptocurrency we use are available in units that are specifically mined. Powerful computers that do powerful mathematical calculations generate these coin units. But, as retail users or buyers, we don't need to mine crypto. We can easily buy, sell, and hold crypto coins from brokers.
What makes Cryptocurrency different?
To understand why cryptocurrency is so unique and revolutionary, we need to understand two terms that form the core of it -
- Blockchain Technology
- Cryptography
1. Blockchain Technology
Blockchain, in simple words, is a database or say, a ledger that stores all the information of cryptocurrencies. Well, not only database, this technology is the very core of crypto.
Cryptocurrency itself is built on the blockchain. Blockchain consists of 'blocks' (blocks of data) and 'chain' (blocks linked together). Hence, blockchain consists of numerous blocks which are connected through chains and the data is scattered among them.
2. Cryptography
Blockchain is known for its top-notch security and Cryptography is what makes it secure. Hashes (the cryptographic codes) link the blocks together. These hashes act as a high-security password which make the blocks impossible to hack and play with.
It is very-very-rare to listen a news stating - Blockchain based utility hacked! Have you heard of such news?
Why should you invest in Cryptocurrency?
Crypto is one of the newest and most popular investment options. Not to forget the returns it generates. People have become millionaires in a year or two. That too by just investing in cryptocurrency.
Also, we all know that one’s portfolio must be diversified with all kinds of investment options. Never put all your eggs in a basket, as they say. Hence, it is logical & rational to include one or more cryptocurrencies in your portfolio.
If you are searching for a few specific points of why you should invest in cryptocurrency, hear them out –
Crypto is an excellent long-term investment: Not all, but the few established ones like Bitcoin, Ethereum, Solana, etc. The way these touch new heights every now & then, your $1000 might become a million in only 5-10 years.
24*7 open market: Unlike the stock market, cryptocurrency markets are open every day, every minute. You won’t have to sit idle Saturday and Sunday.
Decentralized: No authority owns your crypto; neither can someone monopolize its value & circulation. The investors have the sole authority of taking a crypto east or west.
Top comments (7)
Yes, quite many! Infact hacks are something of a recurring theme in crypto.
For the readers, I'm listing just a handful of hacks just from March 2022 alone (if you continue looking, you'll find several more in the same link):
As the post mentions hacks, I've only included hacks in the strictest sense of the word (by no means an exhaustive list). This doesn't include the numerous rug pulls and wash trading in the space that happens at such frequency, that it's kinda difficult to keep up.
So is cryptocurrency really a good investment? Well, I'll leave it to the readers to decide! 🙂
Oh Damn!! Is that so? As far as I've read, cryptography makes it secure and nearly impenetrable. But these links state clearly otherwise.
What do you say Ashwin? Now that we see these metrics, can we really call them secure?
PS. I need to get my facts straight. Sorry for that!
Don't let this user misguide you. Core protocols of any top crypto are secure.
What is not secure is people. like any secure system the user is the most vulnerable point. 99.99% of "hacks" are on USERS not the core protocol.
This is like saying the bank is not secure because your card got stolen...
Not sure how much of a productive conversation can be had with someone who assumes I'm misguiding. Rest assured, my opinions are well-informed after thoughtful consideration, also having listened to what numerous computer scientists (many of them who played a large part in shaping software and indeed the internet as we know it), and economists have to say on the subject.
To the readers: I totally understand why one might think that blockchain based applications are un-hackable, or that they're good for investments. But this narrative is in-fact a very simplistic view for how things actually are - and it for this I was responding to. Cybersecurity is hardly ever that simple, and it is unwise to purely talk in terms of theoreticals.
Contrary to popular belief that gaining control of 51% nodes in the system is extremely hard to accomplish, the latest hack in the Axie Infinity exosystem, constituting $625 million USD, was done due to hackers gaining control of >51% of the validator nodes. It's not like the hackers got access to users actual wallets (so the credit card getting stolen analogy doesn't work here).
So it is prudent to have a well-informed view, especially because there is a world of difference between the theoretical and the implementations in the crypto space.
That is correct, but not only within the blockchain ecosystem, but pretty much any ecosystem in general. As I mentioned earlier, even within traditional banking systems (which use RSA & multi-factor authentication btw), it is much easier and practical for a hacker to trick me into giving access to my bank account, than hacking a bank server.
Besides there is nothing inherently special about blockchains that keeps users any less prone to social engineering attacks than the usual databases. Nor does it account for bad data intentionally being injected into the network.
Add to that the total lack of regulations, legal recourse, and the fact that it's extremely difficult to alter data or issue a rollback in-case of a fraud, makes the space extremely unreliable as of today - so one should be extremely wary when considering investments in the space.
So once again, a world of difference between the theoretical and the actual. Please take extreme caution and don't invest more than what you can afford to lose 🙂 . Many people lost huge sums of money because of the ideals touted in favour of web3, while either ignoring or lacking knowledge of the actual implementations.
If you've managed to read until here, I invite you to read this post:
blog.mollywhite.net/blockchains-ar...
Don't worry about it, you and I are in the same bucket when it comes to learning. 🙌
In theory yes, cryptography makes it hard to hack if we're talking about brute-force attacks. But cybersecurity is never that simple is it? Humans are still the weakest link in the chain and prone to social engineering attacks. Much easier for a hacker to convince or trick me into giving him access to my credit card than say, hacking a bank server. 😅
This is interesting, but you also let it appear to be something, which can make you rich with very little effort. There surely is also a high risc in losing your investments and make you poor.
No doubt about that!!