What are cryptocurrencies?
Cryptocurrencies are digital assets— that you can use as investments and even for online purchases. It is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.
The cryptocurrency industry is growing at a rapid pace with Bitcoin, Dogecoin, Ethereum being the hot buzzwords driving the crypto frenzy these days. Even though the crypto industry is only a decade old, novice investors are drawn to it as they see a quick way to earn profits.
It is worth noting that cryptocurrency does not physically exist, meaning that you can’t pick up a Bitcoin and hold it in your hand. And unlike the Indian Rupee, there is no central authority that maintains the value of a cryptocurrency. Instead, these tasks are broadly distributed among a cryptocurrency’s users via the internet.
Further, each coin of cryptocurrency consists of a unique line of program or code. This means that it can’t be copied, which makes them easy to track and identify as they’re traded.
Is cryptocurrency similar to Blockchain?
No. Blockchain is the technology that enables the existence of cryptocurrency. A blockchain is a digital ledger of transactions that is distributed across the entire network of computer systems. Think of it like a ledger that shows the entire history of that piece of currency.
To put it simply, it is a system of recording information that makes it impossible to hack the system. Each block in the blockchain contains several transactions, and every time a new transaction occurs on it, a record of that transaction is added to every participant’s ledger.
A blockchain database can store a large quantity of information that can be utilised and accessed by many users at the same time.
But what makes Blockchain unique is that it is not owned by a single person or entity— making it more secure and trustworthy. The idea is that because no one controls the blockchain, they cannot take over and rewrite the records.
How to buy cryptocurrency?
Just like the stock market, the crypto market has exchanges or brokers which are the facilitators. These exchanges often charge a fee or commission for each transaction. Some even give rewards for hitting a milestone, some give them as a joining bonus. This policy may differ with each exchange.
Some of the top crypto exchanges in India are — WazirX, CoinDCX, Coinswitch Kuber and Unocoin—users have to sign up with their KYC credentials, download the app, and buy cryptocurrency. These exchanges also help you to monitor the value of cryptocurrency and buy or sell it.
Crypto exchanges rely on investors for the possession of cryptocurrency. This happens when users deposit crypto to sell and some new users come to the exchange to buy it—thereby, facilitating trading.
Cryptocurrency can be purchased fractionally. For instance, if you’re willing to buy a Bitcoin you don’t need to buy a full Bitcoin (BTC) to own some. You can buy a fraction of a Bitcoin. You can own as little as 0.00000001 BTC. This is the case with all cryptocurrencies.
How can you store your cryptocurrency?
Cryptocurrency can be stored in something called a ‘wallet’, which can be accessed by using your ‘private key’—the crypto equivalent of a super-secure password— without which the crypto owner cannot access the currency.
A crypto wallet stores the private keys that give the user access to their cryptocurrencies—allowing one to send and receive cryptocurrencies like Bitcoin and Ethereum. It should be noted that your coins are stored on the blockchain, and the private key is required to authorize transfers of those coins to another person’s wallet.
There are different types of crypto wallets available that cater to different requirements in terms of security, reliability, accessibility, etc.