Cryptocurrency: Online Payments Redefined

Hello folks! Hope you are digitizing well. We are sitting at the dawn of a digital revolution of Cryptocurrency and Blockchain. This article will give you a brief introduction to these terms which are to my understanding might be the 5th disruptive computing paradigm after mainframes, PCs, the Internet and the mobile/social networks. To give you a crystal clear understanding of the concept we will start from the beginning by explaining the terms digital currency, cryptocurrency, bitcoin, peer to peer spending, double spending and then jump to the term called the Blockchain.

Digital Currency/cyber cash/electronic money/electronic cash:

As the name suggests it is digital or online cash which one can use to pay for goods or services bought. It is intangible unlike tangible physical banknotes or minted coins and can only be used via a computer or network connected to the internet.

Digital cash is seamless and helps in making transactions easier without the need to physically meet people. These are extremely useful in situations like as cross border transactions. The only demand is that both the payee and the receiver should be connected to the same network or platform present online or as it is said hosted on the Internet. For example, we are used to making online transactions using Paytm or PayPal. Now when we transfer digital cash via the Paytm or the PayPal to another person, both of us should be connected to or have an account on the Paytm or PayPal. The Paytm and the PayPal are further hosted in the Internet.

Central Bank Digital Currency (CBDC)

Now an online transaction of a digital currency needs record keeping. If the digital currency is issued by the Central Bank of a country in a regulated form it is called a Central Bank Digital Currency (CBDC).

Though CBDC are inspired by Bitcoin (cryptocurrency), but a CBDC is different from cryptocurrencies. Unlike CBDCs, cryptocurrencies are not issued by a state and lack the legal tender status declared by the government. CBDC implementations will likely not need or use any sort of distributed ledger such as a blockchain

China’s digital RMB was the first digital currency to be issued by a major economy.


Instead of being controlled and issued by a central regulatory authority a digital currency can also be unregulated. In the latter case the digital currency can be controlled by the founding organization, the currency developers or the defined network protocol. For instance, think of the tokens you get for shopping by Amazon. The token is a type of currency which you can use for buying products on the Amazon platform only. Hence this is a type of digital currency which is not regulated by a Central Authority of a country and is governed by the protocols of the network (Amazon network of people in this case) are called tokens.

When we use this kind of unregulated currency by applying cryptography (to make it secure), it is called a cryptocurrency. Bitcoin and Ethereum are examples of cryptocurrency.


Let’s understand the digital payments that we make these days, such as Paytm or PayPal. Let’s call these the conventional digital payment methods. A conventional digital payment model is a trust based model, in which we need a trusted financial institution to make an electronic payment and record the related data. In fact, for any payments via these conventional models need one or two Intermediaries. For example, in the payment you make via the Paytm, the Intermediaries involved between the sender and receiver of the digital payment are Paytm and the bank which has given the debit card or credit card to the sender. This model of Intermediaries leads to the below concerns:

  1. Higher fees: You need to pay transaction fees to the intermediaries for making a transaction.
  2. Identity sharing: Well to make one transaction, you need to complete your KYC and share your vital information like name, address, bank account number, AADHAAR number in some cases and so on. It becomes easy for a professional to forge your card.

Hence to avoid these limitations, the Cryptocurrency was introduced. In the year 2009 an unidentified person named Satoshi Nakamoto introduced the concept of Bitcoin, which is a form of cryptocurrency. We do not intend to say here that Cryptocurrency is a flawless model. It has its own limitations, which we will discuss in yet another article.

For now lets see the benefits as against the conventional digital currencies:

  • Peer-to-peer: Transactions made in cryptocurrencies are peer-to-peer without the involvement of any third parties. This facilitates the transaction at lower fees and immune to possible frauds.
  • Protection from Identity Theft: Well, one of the reasons which make them famous is that it allows the user to make a transaction arbitrarily. Whereas if this is compared with the credit card payment mechanism, then here the credit card companies have the complete access to your vital information, which can be compromised also.
  • You own it– The biggest asset about cryptocurrency is that they are completely owned by the owner. If you compare it with another mechanism like Paypal, then the information is shared with the third party. But, with cryptocurrency, you own both the public key and private key which means you are the sole owner of all the information and thus, is free from any sharing.
    Public Key- It is like a bank account number which is known to others so that people can send money.
    Private Key- It’s like OTP or One Time Password stored in cryptocurrencies wallet.
  • Lower Fees: This is yet another popular reason why cryptocurrencies have gained growing inclination from people. Usually, there is no transaction fee for the exchange of cryptocurrencies.
  • Instant Transactions- The strongest point about cryptocurrencies is that the transactions are quick. In case of the normal transaction as we go through a bank, which involves a lot of time in the confirmation of the transaction, and sometimes it may result in payment failure. However, when it comes to cryptocurrency, then the transactions are faster. The P2P or peer-to-peer nature of transaction of cryptocurrency offers huge sets of benefits as compared to the traditional mode of transaction. Thus, it is becoming a popular choice amongst the people.

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