The Anatomy Of Cryptocurrency(Bitcoin)
How Cryptocurrency works(Bitcoin)
List of Cryptocurrency
Cryptocurrency in India
Advantages and Disadvantages
We are in 21st century where we are not afraid of losing money, being
tension of carrying wallet but afraid of power loss, transactions failure, no
Today, humans have evolved so drastically that technology has pretty
much become an extension to our Phenotype. Physical currency is no
longer required, so innovators have found ways to create our reality more
and more virtually by developing currencies which no longer require to be
consisted of physical matter. One of the most notable digital currencies in
today’s online world is Cryptocurrency(Bitcoin).
• Cryptocurrency is a decentralized digital or virtual money, peer to peer
encrypted by cryptography, use blockchain based distributed ledger
technology used for making online transaction or purchasing goods.
• The word “cryptocurrency” is derived from the encryption techniques
which are used to secure the network.
• In 2009 A technical paper was posted on the internet by Satoshi
Nakamoto titled Bitcoin: A Peer-to- Peer Electronic Cash System.
• Distributed ledger technology (DLT) is a digital system for recording the
transaction of assets in which the transactions and their details are
recorded in multiple places at the same time.
The Anatomy of Cryptocurrency(Bitcoin):-
As mentioned, blockchain is the underlying technology of bitcoin.
Blockchain is a public distributed ledger in which transactions are recorded
in chronological order. Any record or transaction added to the blockchain
cannot be modified or altered, meaning transactions are safe from hacking.
A block is the smallest unit of a blockchain, and it is a container that holds
all the transaction details. A block has four fields, or primary attributes:
• Previous Hash- Stores the hash value of previous block.
• Data- The aggregated set of transactions were mined,validated and
include in all blocks.
• Nonce- In a “proof of work” consensus algorithim, which bitcoin uses.
• Hash – This value is the digital signature of block obtained by passing
previous hash value.
Three major concepts of Blockchain:
To understand bitcoin mining, you have to first understand the three major concepts of
1. Public distributed ledger: A distributed ledger is a record of all transactions
maintained in the blockchain network across the globe. In the network, the validation
of transactions is done by bitcoin users.
2. SHA-256: Blockchain prevents unauthorized access by using a hash function called
SHA-256 to ensure that the blocks are kept secure. SHA-256 takes an input string of
any size and returns a fixed 256-bit output, and it is a one-way function—you cannot
derive the reverse of the input reverse fully from the output (what you have
3. Proof of work: In blockchain mining, miners validate transactions by solving a difficult
mathematical puzzle called proof of work. To do that, the primary objective of the
miner is to determine the nonce value, and that nonce value is the mathematical
puzzle that miners are required to solve to generate a hash that is less than the target
defined by the network for a particular block.
How cryptocurrency works:-
• Bitcoin mining is the process of verifying bitcoin transactions and
recording them in the public blockchain ledger. Those who have the
required hardware and computing power are called miners.
• The process is solved based on a difficult mathematical algorithm(puzzle)
called proof of work. All the miners are completing amongst themselves
to mine a particular transaction; the miner who first solves the puzzle
gets the reward. Miners are the network participants who have the
necessary hardware and computing power to validate the transactions.
• In the bitcoin network, as mentioned, users called miners are trying to solve
a mathematical puzzle. The puzzle is solved by varying a nonce that
produces a hash value lower than a predefined condition, which is called a
target. A miner verifies a transaction by solving the puzzle and adding the
block to the blockchain when it’s confirmed and verified by other users. As
of today, Bitcoin miners who solve a puzzle get a reward of 12.5 bitcoins.
• Once a block is added to the blockchain, the bitcoins associated with the
transactions can be spent and the transfer from one account to the other
can be made.
List of cryptocurrencies:-
Though there are now more than 2,000 different cryptocurrencies in
circulation. Some well known and in demand currencies are listed below:
• Bitcoin – BTC
• Ethereum – ETH
• Ripple – XRP
• Steem – STEEM
• Litecoin – LTC
• Dash – DASH
• NEM- XEM
• Dogecoin - DOGE
Cryptocurrency in India:-
• While Bitcoin is already being widely used in India, there is still no clear
law stating whether Bitcoin and other cryptocurrencies are legal in India.
• As by some reports, India is planning to launch its own cryptocurrency
• Whole Indian digital financial system is controlled by NPCI (National
Payment Corporation of India) under regulation RBI. It have its instant
money transaction service called UPI (Unified Payment System).
• Digital currency maintains its users complete anonymity.
• When you make a purchase with traditional money your personal
information is attached to each and every transaction which can be used
to track you and take note of your purchases. But cryptocurrency
transactions carry no personal information.
• Cryptocurrencies aren't directly linked to the laws, rules or regulations of
any government, corporation or bank. Hence, the interest rates, fees and
surcharges that you may have to pay on your bank account or credit card
do not effect your transactions or cryptocurrency in any manner.
• Accounts that hold traditional currency can be garnished or frozen
completely. cryptocurrencies, on the other hand, are not stored in
• Cryptocurrencies are difficult for people to understand, and the
mechanics of key management confuse people.
• The cryptocurrency space is new, disruptive, and subject to a lot of pump
and dump behaviors similar to penny stocks.
• Bitcoins are not widely accepted.
• Wallet can be lost, when hard drive crash or when we loose device.
• Risk of unknown technical flaws.
• Cybersecurity issues.
• Cryptocurrencies such as Bitcoin still have numerous significant
obstacles to overcome before they could totally replace current currency
• In addition to battling the current economic system, cryptocurrencies
have some internal challenges to overcome. Attempting to convert the
entire world financial system to the Bitcoin model, for example, could
cause such a massive growth in blockchain size that the distributed
ledger model would become impractical
• At last it can be say that – Cryptocurrency is the currency for future.