Economics Book Review – The rise of money, a financial history of the world, Niall Ferguson

Cryptocurrency is a digital asset that is mainly used as a transaction medium to secure financial transactions, control the creation of additional assets and verify any asset transfers with the help of strong cryptographic technology. Also known as digital currency or a form of virtual currency. Unlike central banking systems, it is a decentralized control and financial transaction system that works through blockchain, which is mainly used for financial transactions.

The first decentralized virtual currency developed in 2009 is Bitcoin, also known as virtual currency, which works independently without the help of any central bank or administrator. Since then, about 4,000 altcoins have been created from different variants of bitcoin. Bitcoin is considered as a peer-to-peer electronic money system where users perform direct transactions without any intermediaries.

A blockchain is a data file consisting of multiple blocks that store records of all previous bitcoin transactions and store the creation of new ones. The normal average time between each block is about 10 minutes. The most common use of Bitcoin is supported by external software called Bitcoin Wallet. You can easily store, receive and manage transactions of bitcoin units using this software. To carry out transactions using bitcoin, you need to have an account at any bitcoin exchange in the world and transfer fiat currency to that account. Thus, the account holder can carry out future transactions using these funds. Apart from bitcoin, some of the other sources of cryptocurrency are petro, which is mainly used for oil and mineral resources.

There are some pros and cons to using digital currency. The main advantages of using virtual currency are as follows:

• Provides a fast transparency layer:-

Bitcoin usually works with the help of a ledger called Blockchain, which records and tracks every transaction. Once a transaction is made and recorded in this ledger, it is considered static. These transactions can be further audited at any time in the future and therefore additionally ensure security and privacy regarding all transactions made through a particular account.

• Fast processing and portable usage:-

With the help of a memory drive, billions of dollars worth of bitcoins can easily be moved from one place to another without detection. Using this bitcoin technology, any type of transactions can be done without the involvement of a third party. This will result in easy and fast transaction without any third party permission,

• Low operating costs include:-

The transaction costs associated with exchanging these digital currencies are very low, making it more affordable than real currency for people around the world. Thus, the cost of any operation performed is very low, which becomes an advantageous feature for the population when performing any operation.

• Fights and eradicates poverty:-

Often the banking systems and financial institutions do not provide help or assistance to the backward classes especially in the rural areas. Bitcoin serves as an alternative where it extends its powerful financial services to anyone with access to the internet. It often acts as a support for the poor and downtrodden classes and in most cases no alternative is given.

When new or latest technology comes, there are also some negative factors associated with its use:-

• Ignorance and mistrust of the population:-

Due to the lack of knowledge about digital currency, people are more likely to distrust its widespread use. Hence, there are very few business systems that accept these sources of cryptocurrency, thus limiting the business systems that prefer to use virtual currency in their day-to-day operations.

• Transactions not tracked:-

Since Bitcoin transactions are untraceable, it provides space for criminal activities. In such cases, drug dealers and honest people use such virtual currency so that their illegal activities are not easily detected.

• Nature of Volatility and Uncertainty:-

Cryptocurrency is sometimes volatile and continues to change frequently on a large scale. Sometimes people make a lot of money when the market rates of these virtual currencies rise and sometimes they face a huge loss when the prices fall.

Cryptocurrency is an innovative yet ambitious concept that could potentially disrupt the entire financial market. True, this digital currency caught the attention of the world in a short period of time. Every new technology that appears in the market always has advantages and disadvantages. To make the best use of it, you need to look at both sides before making any decisions.