Cryptocurrency - Is the hype really worth it?

Everyone loves to grow quickly, so do I! This idea of fast growth brought me across a currency that I never knew about! "Cryptocurrency"!

Before we dive into the details of cryptocurrency, let's take look at its background!

The first cryptocurrency to be introduced was 'Bitcoin' in the year 2009. The Identity of the founder is still unknown by it is believed that a person so-called 'Satoshi Nakamoto' founded this crazy highly volatile currency.

The concept of Bitcoin first came into creation in 2008, as a response to the Great Financial Crisis and the financial world's reliance on banks as intermediaries of all financial transactions. This way, the banks did not need to be involved in each transaction.

In general, the currency which we use for example, Rupees, Dollars, etc, is a physical form used for the trading purpose whose value remains constant, or stable. Now, this constancy which is maintained is regulated by a body approved by the government of a country.

This is the opposite case if we take into account the topic of cryptocurrency. This is because no authority regulates this currency. Which results in its volatile behavior. Now, the people who trade or use this currency are the ones who believe this currency. Well, then how does the value of this currency change? Let's find out.

The price hike or fall depends on the basic concept of demand and supply. When demand for bitcoins increases, the price increases, and when demand falls, the price falls. Now, as we are clear on the basics of Cryptocurrency. Let us take a look at how to get bitcoins or earn them.

The first and foremost also very simple method is purchasing bitcoins.

You trade for bitcoins for your money as we do generally do for any goods.

The second one on this list is, you get bitcoins in trade for any goods. To elaborate, you give the buyer a commodity as a seller and he pays you in the form of Cryptocurrency.

Now, comes the part using which most of the people earn bitcoins which is "Mining". Also, it is fascinating to know that this is the only way new bitcoins can come into existence and there is a limit to it! Well, this is to be noted that mining isn't easy and requires specialized hardware which can up your electricity bills. So, Mining is not feasible for everyone. If you are gaining profits for the electricity you are paying then, sure! you can become a miner and earn money for your hard work!

Coming back to our regular, general, centralized currency, there is verification at every step of the transaction which results in a successful transaction between two people regulated by an authority responsible. For Cryptocurrency, which is decentralized, there is nobody to regulate the transactions, so here the role is played by miners who perform mining operations, this is not some physical mining work of course. In this case, mining is the process of verifying the transaction between two persons to avoid any fake transaction. This process helps generate new bitcoins which go into the pockets of the hard-working miners.

If we look at the current scenario, we don't only have one cryptocurrency but we have many others also like Ethereum, Binance coin, XRP & the one which is currently trending is the Dogecoin! It gained its rise in the price graph after Mr. Elon Musk's tweet. I have personally not invested in any, but my connections have, and told me they have gained significant profits!

Please keep in mind as mentioned above the people who trade in cryptocurrency or mine it is the ones who believe it. Now, when one purchases any cryptocurrency it can only partially be called an 'Investment', because when we invest in something that becomes our long-term asset, sure! you can invest in cryptocurrency but we know it is highly volatile! So, only the ones who believe in it call it an investment.

Many people have bought a couple of bitcoins when they cost a mere two-digit or three-digits and forgot, now they are billionaires! This was years and years ago.

To keep a track of all these processes there is a decentralized system accessible to everyone with any device connected to the internet, which stores the information of transactions taking place over the globe. Blockchain technology also serves as your digital wallet for your cryptocurrency and also shows the real-time graphs of each cryptocurrency and helps you trade in them. The most important thing is that blockchain is decentralized and eliminates the trust issues we have on third-party organizations for any of the services. It is decentralised for cryptocurrency but is a centralised system to keep track of every other transaction. Information is generally stored in the form of blocks and a new block is created for every new transaction.

This is just the sweet side of the story, let us study the facts now, with some of the real-life practical examples.

Personally being a tech enthusiast and a passionate gamer, both of these industries have been under a significant loss due to the pandemic as we all know, but with an increase in the demand for GPU's and certain CPU's chips for mining, there has been a supply shift to the miners as they purchase the components in bulk for mining purposes. This has increased the prices of the components and reduced their supply which resulted in black-marketing.

Sony has fallen back in the production of their latest generation consoles due to the supply shift.

Do we really need cryptocurrency? To all the crypto lovers out there is might be hurting to you but it is the bitter truth.

There is generally no need to use cryptocurrency the major reason being its volatility. Also, people have gained interest in it including me by seeing the influencers promote cryptocurrency (majorly Bitcoin) through social media & YouTube. They mostly do it as a part of the paid promotion strategy but they do not indulge in the activity of trading in cryptocurrency, shocking yet true!

Rather than cryptocurrency, we should invest in stock markets, share markets, etc. which would help grow our country's economy. I am not trying to give a negative impact on Cryptocurrency, but these are just facts. I would say study the graph, it has both ups and downs but invest wisely which is stable and would also benefit the nation as well as yourself.

--- Vineet Patiar