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Current Affairs

Crypto currencies

Date: 20 October 2019 Tags: IT, Mobile & Computers

Issue

Finance minister Nirmala Sitharaman has cautioned aginst use of crypto currencies on an official basis, citing various threats posed by it.

 

Background

The virtual currency came into spotlight after Facebook has planned to launch its virtual currency known as Libra.

 

Details

Cryptocurrency

  • A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets.

  • The decentralized control of each cryptocurrency works through distributed ledger technology,known as blockchain, that serves as a public financial transaction database.

  • Bitcoin, first released as open-source software in 2009, is generally considered the first decentralized cryptocurrency.

Advantages of cryptocurrency

  • No Inflation

There is no possibility for development of inflation in the system

  • Peer-to-peer cryptocurrency network

Transactions are made by hundreds of distributed servers. Neither banks or taxes, nor governments can control the exchange of money.

  • Unlimited possibilities of transaction

Each of the wallet holders can pay to anyone, anywhere and any amount. The transaction can not be controlled or prevented.

  • Anonymity

It is completely anonymous and at the same time fully transparent.

  • Data secure

No chances to use some personal data for fraud.

 

Drawbacks of cryptocurrency

  • Investment risks

Large risks of investing in cryptocurrency that should be considered in the medium and long term.

  • Regulations

It is not considered a universal curency due to non-recognition by official sources.

  • Security

They can be used to finance illegal activities such as terrorism.

 

Block chain

  • A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography.

  • Each block typically contains a hash pointer as a link to a previous block, a timestamp and transaction data.