Today, in a very simple way that even a small child can understand. I am going to explain what blockchain is and how cryptocurrency works. Why their prices go up and down. What is minor. What is mining. What is Network? How to trade and invest in it. Everything will be clear to you till the end.
Understand cryptocurrency with a simple story
CryptoCurrency for Beginners
Let's start with a very simple story. Suppose two friends are Abid and Sajid. Abid got Sajid to do the work for ten rupees. Instead of giving him ten rupees, he said to him, "I will give you a palm of ten rupees." Now Abid and Sajid thought that things should be simple, calculations should be easy, time is digital, tomorrow we will be away, it is not necessary to always be there.
We digitize this palm, we make a digital palm. Now let's make a digital version of the palm, but here's the problem. And the fact is that the palm is digital, anyone can copy and paste it, anyone can multiply it.
ledger
Now there may be a solution. Like Abid gave Sajid a digital palm. So it should be noted in a computer document that Abid has given a palm to Sajid. The document containing this account is called ledger.
Now this ledger is being maintained by a single servant. And he can mess up if he wants to. He can do anything. So here's a solution. If this ledger is being stored in every computer, every computer has to calculate the total number of digital palms. How much does Abid have? Abid gave a palm to Sajid, now how many palms does Sajid have.
If this calculation is happening in every computer. So if any one person tries to mess up he will mismatch the whole computer and he will be caught. Now taking the example of Abid and Sajid, we will easily understand the whole concepts of Cryptocurrency.
What is cryptocurrency and bitcoin
First let's talk of cryptocurrency. The digital palms that they exchanged are a kind of cryptocurrency.
Crypto means Secret, Currency means Goods and Services. Cryptocurrency means a secret currency, a private currency.
You may have heard of many types of cryptocurrencies. Such as bitcoin dogecoin, Litecoin etc.
This is the public ledger which is being maintained by many computers, this is pear to pear network. Many people and computers are working together to maintain this ledger. It does not belong to anyone.
How it is maintained. Behind this is the revolutionary technology called blockchain.
What is Blockchain
Blockchain is made up of two words root. Block and chain. Chain of blocks.
This blockchain works in the same way as a train has many compartments, one compartment is full and now the other compartment is filled and now the next compartment is filled.
Transactions increased in one block, now the next block is connected with it. Transactions have increased in it, now the next block is connected and the transaction that starts in each block is connected with the transaction of the previous block.
This means that all transactions are connected to each other in the form of blockchain. This blockchain is available not only in one computer but in many computers with full transparency.
In such a case, if someone wants to cheat and someone wants to commit fraud, then he gets tracked.
Now let's assume that both Abid and Sajid have cryptocurrencies. Abid has two bitcoins. He gave a bitcoin to Sajid. Now all these computers are working. Quickly check to see if Abid really has two bitcoins. He has only two bitcoins for all his old transactions. Now he gave a bitcoin to Sajid so he has one left.
A complete check was done on how many bitcoins Sajid had and Sajid had 1 bitcoin credited to his account. All these transactions are done with accuracy and the transaction is completed. This is blockchain technology.
What is mining and miners?
So everyone who maintains this public ledger is taking responsibility for it. These are called miners. And this process of maintaining and validating the transaction is called mining.
It doesn't happen to anyone sitting down. It's all system generated, it's all automatic. But it takes special computers and special software. And in return for the time and money it takes to mine in this process, the miners get some reward in the same currency.
Now you will say OK. It is understood that cryptocurrency is a private digital currency. All transactions are recorded in a kind of public ledger. Many systems have a maintenance with blockchain. It's clear. Minor who is recording it whose systems are recording it. Mining cleared.
What is Cryptography
Now here comes a question. How much money I have is being maintained in every system. There is no privacy here. Everyone knows who has how much money and who is carrying what.
So this is not right now here comes a strong pillar of cryptocurrency and that is cryptography. Cryptography means everything is codeed. No transactions are made in anyone's name within this system. Instead, a code consisting of 28 to 34 digits is used for transactions. this is the reason for the introduction of cryptocurrency and the growing popularity of cryptocurrency.
What is the purpose of cryptocurrency ?
Some people have this problem that when money is ours then why control it in the hands of others. Why in the hands of banks. Why in the hands of the authorities. Why in the hands of agencies.
With such things people had a problem why it could not happen, that even the currency would be decentralized and no one would have control. When the currency belongs to everyone, then control belongs to everyone. Why do people sitting in the bank know how much money I have? Why do people of so many trading agencies know? Many parties know why.
Why Cryptocurrency prices go up and down
Now the point is that when one body is not controlling it, when everyone is controlling it then how its price is decided. Then how come it is heard that the rate of bitcoin has increased, the rate of bitcoin has decreased.
So here I will tell you that in each currency it is pre-defined how many coins will be produced in total. And when something is fixed, when something is limited, its cost depends on how much demand it has.
Give an example that is a piece of land. He is a fixed land he is a limited right. Now when there are more people buying this land, many people want to buy this land, then its price will increase. Now they are trying to buy less land, its popularity is not so much, its need is not so much, then its price will go down.
The prices of cryptocurrencies also depend on what the news is and what the companies are planning.What investors are planning.
As Elon Musk said in March, Tesla will start accepting bitcoins. People said the demand for bitcoins is growing and people started buying bitcoins. Bitcoin rates have begun to rise, and in May Mr. Elon Musk says that Tesla will not accept bitcoins.
And then the bitcoin, which had reached sixty thousand dollars before the announcement, came to thirty thousand dollars. Its Also called Musk Deep.
In the same way, in cryptocurrencies, when the demand of a currency is visible, the usage is visible and its price goes up. When more people want to buy it, the price goes up. And in the opposite case the price goes down.
The supply of bitcoin is also limited to twenty one million, so as its demand increases and decreases, its price changes.
Suppose in 2010 the bitcoin was 0.008$ in the middle it went up to 60000$. At today's date it is approximately 40000$. This means that if someone had invested 1$ in bitcoin in 2010, he would be the owner of millions of dollars today.
Advantage of cryptocurrency
When it comes to benefits, one of the benefits is decentralized. No one country, no single government, no separate power is controlling it, individual is not controlling it, it is with everyone. In this, people see the huge benefit that their financial capabilities are not being affected due to the decisions of the government.
For example, the value of 100 rupees was very different ten years ago and today it is different. Inflation is increasing. The government can print notes and the whole economy can go up and down. But that doesn't happen in cryptocurrency. Like bitcoin 21 million does not go beyond that number. So it's not like someone else produced bitcoins and shook the economy.
When it comes to safety, many people believe that because blockchain technology is being used, it is very reliable. Infect blockchain technology will be used in education, healthcare, data management and in many areas, not just in currencies.
Disadvantages of cryptocurrency
Now let's talk about disadvantages, because no single government, no single authority is controlling it. So if there is a problem, if you have a complaint, who will you go to? It is not under the control of anyone. If you have the advantage, you also have the disadvantage. And because it is a secret currency. So one of the disadvantages of this is that in online ethical work people pay for it.
The process of over third mining is not eco-friendly. It uses a lot of power. Too much electricity is used. Means resources are used. And I hope to work on this thing in the future. That if we are moving forward then we are not moving forward at the expense of any nature. This thing should also be worked on. How to make it eco-friendly and safe.
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