Cryptocurrency

Why in the News?

Singapore-headquartered cryptocurrency lending and trading platform Vauld suspended withdrawals, trading and deposits because of volatile market conditions and financial difficulties.

About Cryptocurrency:

• A Cryptocurrency is a medium of exchange, such as the rupee or the US dollar, but is digital in format.

  • For Example, Bitcoin, Ethereum

• It uses encryption techniques to both control the creation of monetary units and to verify the exchange of money.

• In traditional financial deals, where two parties are using fiat money, a third-party organisation — usually a central bank — assures that the money is genuine and the transaction is recorded.

• With cryptocurrencies, a chain of private computers — a network — is constantly working towards authenticating the transactions by solving complex cryptographic puzzles. 

  • For solving the puzzles, these systems are rewarded with cryptocurrencies. This process is called mining.

• These are decentralised in nature, which means that no single entity owns or controls them. Moreover it does not rely on central banks, and is a collection of data, overall designed to work as a medium of exchange, using its underlying technology, the blockchain. 

• There are two types of crypto assets – coins and tokens. Coins have their own blockchain network while tokens are part of projects built on top of existing blockchains. 

• They are not backed by conventional assets such as gold reserves.