Indian Govt. posses the bill to ban all the private cryptocurrencies but allows some exceptions to promote this technology but first understand what is private cryptocurrency.
What is Private Cryptocurrency ??
Private cryptocurrency, also known as privacy coins, is a class of cryptocurrencies that offer anonymous blockchain transactions.
In order to obscure the origin and destination of cryptocurrency transactions, some techniques used in trading crypto assets include hiding a user’s real wallet balance and address, and mixing multiple transactions with each other to elude chain analysis.
Bitcoin and other non – private blockchains, on the other hand, offer transparency by allowing anyone to perform chain analysis and view public addresses and transactions in their network.
In this way, it is possible to track someone’s deposits and withdrawals of bitcoin and other non – private cryptocurrencies.
However, private cryptocurrency offers both anonymity and untraceability . Anonymity hides the identity behind a transaction, while untraceability makes it virtually impossible for third parties to follow the trail of transactions using services such as blockchain analysis.
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What is the difference between cryptocurrency coins and tokens?
Cryptocurrency is a digital currency that works as a medium of exchange. It is basically an encrypted digital currency transferred from user to user through a secure network.
It uses cryptography to secure and verify transactions as well as to control the creation of new units of a particular cryptocurrency. Bitcoin, Ethereum & Dogecoin are some of the popular cryptocurrencies.
While Tokens are a type of cryptocurrency that represents an asset or specific use and resides on their blockchain.
Tokens can be used for investment purposes, to store value, or to make purchases. Some tokens are created through initial coin offerings. Tokens are the primary cryptocurrency of the blockchain.
Tokens are created for various purposes, such as for use on a specific platform. Tether, Uniswap, Chainlink, and Polygon are some popular tokens.
While the value of a cryptocurrency like Bitcoin is directly based on its adoption as a medium of exchange, the value of utility tokens is based on their adoption as a staking mechanism.
Tokens are used for decentralized applications that run on top of an existing blockchain. With tokens, decentralized applications share the benefits of the underlying blockchain, but they don’t need an independent infrastructure.
As of 2021, a large number of DApps run on the Ethereum blockchain which enables ‘smart contracts, so their tokens make use of the Ether coin internally.
Polygon is an Indian cryptocurrency platform that aims to provide faster and cheaper transactions on the Ethereum Blockchain.
What are the differences between decentralized and centralized cryptocurrencies?
Before I explain the exact meaning of centralization, I want you to think about some of the systems that you use every day. Whether it’s Facebook, YouTube, Twitter, your bank account, or practically anything else that you use — these are all controlled by a centralized authority.
This means that for a data transaction to be verified, a third-party intermediary must do this on your behalf. Let me explain this further by using the example of Yahoo…
Imagine that you want to send your friend a private email containing some funny pictures from a party. You sign in to your Yahoo account, type up the email, upload the pictures, and then send it to your friend. At this moment in time, think about what information Yahoo has on you.
When you first registered an account with Yahoo, you had to provide your personal information, such as your full name, nationality, and date of birth. After that, every single email that you send is stored internally on the Yahoo centralized servers.
A decentralized system that operates on the blockchain is controlled by no single authority, nor is it backed by any centralized government or nation-state.
Instead, control is distributed fairly to anyone that wants to use the system. This makes society fairer as it takes control away from powerful corporations.
The second thing to remember is that people don’t need to identify themselves to interact with a decentralized system. They simply use a private and public key, meaning they can remain anonymous.