What is Cryptocurrency?
Overview on Cryptocurrency
Cryptocurrencies are virtual currencies that are secured with cryptography, which makes it nearly impossible to counterfeit. Most cryptocurrencies are decentralized networks based on blockchain technology. Blockchain is a ledger-based system on a network of computers that ensures the integrity of the transactions. Cryptocurrencies are typically not issued by a central bank, which means they are not impacted by government involvement.
Cryptocurrencies are monetary systems that facilitate secure virtual/digital payments in the form of "tokens”. These tokens are tracked by ledger entries in the cryptocurrency system. The term "Crypto" refers to the encryption algorithms and cryptographic techniques that secure these ledger entries. The cryptography used in cryptocurrency was originally developed for military applications.
The first cryptocurrency was Bitcoin. It was created in 2009 by "Satoshi Nakamoto". Bitcoin is currently the most popular and most valuable cryptocurrency, with over 18 million bitcoins in circulation. There are thousands of other cryptocurrencies with a variety of specifications. Some of these are derived from Bitcoin, while others are brand new currencies.
Some of the competing cryptocurrencies, known as "altcoins," include Litecoin, Peercoin, and Dogecoin, as well as Ethereum, Cardano, and EOS. Today, the overall value of all the cryptocurrencies in existence is around $1.5 trillion, with Bitcoin representing more than 60% of the total.
The buying and selling of cryptocurrencies can be done using platforms such as Coinbase.
Cryptocurrency Pros
Cryptocurrencies make it easier to transfer funds directly between two parties, without the need for a bank.
Cryptocurrency transfers are secured by the use of public keys, private keys, and incentive systems.
In cryptocurrency systems, the users account is referred to as a "wallet". This account has a public key, while the private key is known only to the owner and is used to verify transactions.
Fund transfers are completed with minimal processing fees, avoiding the high fees typically charged by banks.
Cryptocurrency investors and users value the anonymity and personal privacy of using cryptocurrencies like Bitcoin. No government or corporation has access to your funds or personal information.
Cryptocurrencies have have been praised for their portability, divisibility, inflation resistance, and transparency.
Cryptocurrency Cons
The private nature of cryptocurrency makes it attractive to criminals engaging in illegal activities such as money laundering.
Cryptocurrencies are virtual and are not stored on a central database, a digital cryptocurrency balance can be wiped out by the loss of a hard drive if a backup copy of the private key does not exist.
Cryptocurrency blockchains are very secure, but other parts of the cryptocurrency system, such as the exchanges and wallets, are not as secure against an outside threat.
Market prices for cryptocurrencies are based on supply and demand, so the rate at which a cryptocurrency can be exchanged for another currency can fluctuate widely.
Some experts believe that blockchain technology could disrupt the financial industry.
Cryptocurrencies are relatively new and cryptocurrency investing can be speculative and highly volatile. Before investing in anything, especially crypto, do your homework.
Happy Investing, Verdia