What Is Cryptocurrency? Everything You Need to Know About Bitcoin, Ether, Dogecoin, and More

Cryptocurrency investment in India and around the world reached new heights in 2021 after the market witnessed a surge in the first four months. As the value of cryptocurrencies like Bitcoin and Dogecoin set new records, interest in them also rose. Then came the dip. In one crash in May, the digital coins lost most of their gains. But while some investors lost their money, others that got in early made huge profits too, and interest has only risen since then.

Cryptocurrency has generated huge curiosity. More and more people are getting involved in the trade of this new digital asset. However, the high level of volatility in the crypto market means that you should do your own research before you start investing in Bitcoin, Ethereum, Dogecoin, or other popular currencies. Bitcoin price in India stood at Rs. 29.7 lakhs while, Ethereum price in India stood at Rs. 1.8 lakhs, and Dogecoin price in India stood at Rs. 15 as of 09:30am IST on July 30. To help you de-jargonise cryptocurrency and make sense of the crypto market, here's everything you need to know about cryptocurrency.

What Is Cryptocurrency?

Cryptocurrency, often just called crypto, is (in highly oversimplified terms) digital money as opposed to "fiat", or government-issued, currency. Unlike traditional money, which is built around centralised distribution, cryptocurrency is maintained using something called a distributed ledger. This brings a great degree of transparency, but also anonymity through the use of encryption.

Initially, there was some doubt about the value of cryptocurrency and one of the early users spent 10,000 Bitcoin to buy two pizzas, making them (retrospectively) some of the most expensive slices of all time.

Many companies have also begun adopting cryptocurrency as a payment system to tap the growing user base. Some have even issued their own currencies, often called tokens, for the trade of goods and services specifically offered by them.

The Most Popular Cryptocurrencies?

The top five crypto coins according to their market capitalisation are: Bitcoin; Ethereum; Tether; Binance Coin; and Cardano. Of these, Bitcoin is the oldest. It was launched in 2009, soon after the economic recession, by an anonymous figure under the pseudonym Satoshi Nakamoto.

Another popular coin that is now not among the top five is Dogecoin. Launched in 2013 as a meme currency to poke fun at Bitcoin, it gained following after billionaire entrepreneur Elon Musk threw his weight behind it earlier this year.

Are They Legal?

Many countries have begun backing cryptocurrency, but in many cases, there is no formal regulation around cryptocurrencies yet. In India, there was initially talk of bans, but although the Reserve Bank of India (RBI) restricted crypto trading in 2018, the Supreme Court last year reversed the RBI order. The RBI has also now said that it is in the process of launching its own cryptocurrency in a phased manner.

Why Is Cryptocurrency So Popular?

There are a variety of reasons for this. The most prominent appears to be the promise of a good return. Many people are spending actual money now to buy Bitcoin in the hope that it will give good returns at a later stage when the demand increases.

Musk has even said that these coins can be the currency of the future, but he did not say which one will be or whether there would be more than one global cryptocurrency.

What Is Mining In Cryptocurrency?

The term crypto mining means gaining the digital coins by solving complex cryptographic equations using sophisticated computers. This is the process by which new coins are generated, although many people who are trading in cryptocurrencies are trading using the existing tokens, and not mining them directly.

Where Are Cryptocurrencies Traded?

According to CoinMarketCap, a market research website, more than 11,000 cryptocurrencies are traded publicly on dedicated exchanges around the globe. It pegs the total value of all cryptocurrencies in circulation at over $1.5 trillion (roughly Rs. 1,11,50,625 crores) as of July 29.

Cryptocurrencies are mostly traded through exchanges but there are also other means of transfers offline, through paper wallets and it is possible to directly trade your tokens too, although it is safer for retail investors to stick with an exchange.