A cryptocurrency is a digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets. Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies.
Cryptocurrencies use decentralized control as opposed to centralized electronic money and central banking systems. The decentralized control of each cryptocurrency works through a block chain, which is a public transaction database, functioning as a distributed ledger.
Recently, discussions over cryptocurrencies have taken over just about every media outlet. While we see headlines featuring the largest virtual currency “Bitcoin” or articles relating to the rise and decline of the cryptocurrency values.
It is quite evident that a large percentage of the population remains confused and unsure of the concept. If you’re finding news related to cryptocurrency difficult to understand, you are not alone.
This blog aims to provide you with a quick synopsis of the discussions to date, and can act as your stepping stone into the cryptocurrency world. For starters, what is a cryptocurrency? A cryptocurrency is defined by Investopedia as, “a virtual currency that uses cryptography as security”. While this definition broadly defines the concept, let’s dig a bit deeper into the details with 5 important aspects of cryptocurrency:
It is the most widely-known type of virtual money and was the first cryptocurrency created. It has been experiencing astronomical growth and attention since its release in 2009. Bloomberg reported its total value as $400 billion in December, 2017. Evidently, It is dominating the cryptocurrency world.
Cryptocurrencies are fully decentralized. This means that there is absolutely no government regulation. For this reason, it is extremely crucial for the network to be effective and secure, as there is no central server.
Typically, double spending is not an issue when making transactions because of the presence of a central server. However, because cryptocurrencies lack this, they must rely on the peer-to-peer network to prevent double spending from happening. Bitcoin uses an online ledger, Blockchain, that tracks each and every transaction performed by users.
It’s important to note that each transaction is finalized and made, there is no going back. Unfortunately, if a mistake is made, not even the government or the cryptocurrency geniuses can reverse this.
Credit cards, AMEX, Debit cards, etc. are all linked to very personal information, which becomes a threat if misplaced or stolen. In contrast, cryptocurrencies do not provide any personal information and instead users are given a code number to represent oneself. In turn, transactions and transfers receive increased protection when cryptocurrencies are used.
With the enormous growth of cryptocurrencies, we predict that virtual money will become more and more prevalent within social media and news outlets. Hopefully this brief synopsis has assisted you in understanding the underlying concept of cryptocurrencies.
We are excited to see all the possibilities and potential that has stemmed from cryptocurrencies!