Why in the news?

• Iran has urged the BRICS countries to use cryptocurrencies to pay for trade amid tensions of sanctions on Iran.

Cryptocurrency

• What is it?: A cryptocurrency is a digital or virtual currency that uses cryptography for security.
• Features:
  • Digital currency: Exists only electronically, not as physical bills or coins.
  • Decentralized: Not controlled by any central authority like a government or bank.
  • Secured by cryptography: Uses encryption techniques to ensure secure transactions and prevent counterfeiting.
• How it works:
  • Transactions: Recorded on a shared public ledger called a blockchain. This ensures transparency and immutability (transactions can’t be altered).
  • Mining: New units of cryptocurrency are created through a process called mining, which involves solving complex mathematical problems with computers.
  • Wallets: Users store their cryptocurrency in digital wallets. These wallets can be software-based or hardware devices.
• Types:
  • Bitcoin (BTC): The first and most well-known cryptocurrency.
  • Ethereum (ETH): A platform that allows for building decentralized applications (dApps).
  • Tether (USDT): A stablecoin pegged to the value of the US dollar.
• Benefits:
  • Fast and cheap transfers: Can enable faster and cheaper international payments compared to traditional banking systems.
  • Security: Encryption makes it difficult to counterfeit or steal cryptocurrency.
  • Transparency: Blockchain technology provides a transparent record of all transactions.
• Challenges:
  • Volatility: Prices of cryptocurrencies can fluctuate significantly.
  • Security risks: Crypto wallets can be vulnerable to hacking.
  • Regulation: The regulatory landscape for cryptocurrency is still evolving.