It all started in 2009 when pseudo named Satoshi Nakamoto created the world’s most widely popular cryptocurrency – Bitcoin. Rife with anonymity and in the absence of a regulatory authority and middlemen, Bitcoin and other cryptocurrencies are gaining much mileage for e-transcations. In fact, in recent times, several top-notch e-retailers such as Amazon.com and pizza makers, web hosting service providers and even beauticians are acception cryptocurrency in exchange of goods and services.
Where is the cryptomint?
The cryptomint is all but an algorithm that runs continuously in a data field. Every time a user performs a transaction, it gets added to a list of unconfirmed transactions block. This block is broadcasted to all users in the network . As soon as any network user solves the cryptographic hash, the transaction gets confirmed. Hence, while the transaction initiator earns a confirmed transaction block, the user who cracks the cryptographic hash earns a few cryptocurrency as a reward for solving the block. For instance, BitCoin offers a reward is 50 Bitcoins.
There are several trading websites that allow people to purchase and sell their stock of cryptocurrency at the price of their local currency. It must be noted that cryptocurrency as such is not bound by any particular geography or country. Hence, it’s value is determined in a global market by owners of the digital money.
All pending transactions are broadcast publicly through blocks, with the name of the seller and buyer kept anonymous. Once a transaction block is cracked, the money is added to a public ledger which is maintained by every user as a transaction list. However, while regular money transactions can be reversed in case of a cancellation, cryptocurrency transactions are irreversible. So once a transaction block is added onto the global network, the money will exchange hands and no cancellation is permitted.
The crypto advantage
While the advent of cryptocurrency was to defy the concept of a regulatory authority and lack of anonymity during monetary transactions, the concept has reached a new level in the world of e-commerce today. For one, it is possibly one of the safest methods of exchanging money power. So what makes it so safe?
For one, transactions are irreversible and each transaction block is verified by a single user, which then allows other users to update their block chain. Hence, if we take a scenario where there are two blocks competing for clearance, the longer chain is often given preference and accepted as a legitimate exchange. In such a scenario, if a fraudster wants to change a transaction or insert an illegitimate chain to earn undue advantage, he/she will need to replicate all blocks, including the legitimate transaction, and the other blocks in line – all at a rate faster than all the CPUs in the world. Quite un-human!
In 2014, Mastercard applied for a patent (US 20140172633 A1) which describes a method of payment for a global shopping cart. There are several payment modes supported and BitCoin has been mentioned as one of the supported form of currency.
Amazon owns a US patent 8,719,131 that discusses the allocation of multi tenant resources to users in need. The resource will be allocated for a duration pertaining to certain payment. The payment mode includes digital cash and cryptocurrency such as BitCoin.
Volatile and unstable: Then why is it such a favorite?
The value of cryptocurrency is determined by players in the market – much like stock traders. However, with the levels of anonymity and absence of a regulatory authority, cryptocurrency rates can get extremely volatile. For instance, a coin that costed a purchaser $20 a year ago, may cost $350 today and $100 in a month’s time. Such dramatic changes to its costs may find investors losing or earning money by the thousands.
While this is an interesting gamble for investments, cryptocurrency can be a risky possession for transactions for goods and services.
In our following blogs, we shall discuss more about mining cryptocurrency, the most famous cryptocurrencies and how governments across the world are trying to gain a foothold in e-money.
(Featured image source: https://www.flickr.com/photos/btckeychain/10680032615)