What is Cryptocurrency?
Cryptocurrency is a non centralized currency secured by cryptography and a disparate blockchain recording network. The dispersed network structure distributes the money’s ownership and value across the user community. This is much different from the conventionally established and more widely used fiat monies. Fiat monies are those currencies that are generated, backed and controlled by a central ruling body or government.
Who Created Cryptocurrency and Why?
In 2008, the alias Satoshi Nakamoto invented cryptocurrency with the goal of thwarting any one entity from obtaining exclusive control or manipulation capability of a money (i.e. money = exchange medium). Cryptocurrency was aimed to provide users the direct power for creating, using and controlling an exchange asset (i.e. money). To accomplish and maintain a non-monopolizing authority balance, cryptocurrency relies on the integration efforts of independent but interconnected networks. With sophisticated mathematical computations and algorithms, these disparate networks meticulously collaborate to process and permanently record all asset exchanging transactions to a ‘forever’ ledger also called the blockchain network.
|Bitcoin||$6 345||$3 410 520||+0.4%|
|Ethereum||$435.65||$1 418 630 000||+1.3%|
|Dash||$229.19||$153 088 000||-0.9%|
|Litecoin||$80.53||$283 573 000||+2.2%|
|Monero||$127.35||$41 956 900||+3.75%|
What Are Other Good Things About Cryptocurrencies?
As explained, cryptocurrency is essentially a peer to peer medium of exchange. Thus, a big benefit with this is that fewer authorization entities are needed between the money’s sender and receiver. The fewer middle entities involved the fewer the fees there will be added in processing the transfer. Thus, cost is greatly reduced when compared to that of transferring other assets such as fiat currencies.
Another benefit to using cryptocurrency is the ease in accessibility. Anyone who has access to the internet can acquire and move cryptocurrency funds around. Additionally, as cryptocurrency gains popularity and demand increases, means for obtaining the money are also increasing. For instance, in most metropolitan areas the number of automated teller machines (ATM) for accessing the currency is growing.
One more benefit includes the fact that cryptocurrency creators designed the asset to be largely removed from other inflationary impacting factors. Since many exchangeable assets or instruments are typically connected to other objects, like a fiat currency is tied to the backing region’s government and economy, those asset values are affected by the business and economic conditions that they are associated with. As such, those mediums of exchange have interdependent inflationary risks associated with the associated factors.
Cryptocurrency transactions are processed and documented on the blockchain network. The blockchain is a public ledger with every transaction recorded in detail. Many individuals see this detailed transparency as an additional benefit.
The final benefit we will discuss is that cryptocurrency can be divided into smaller units. This gives the money great flexibility for purchase and exchange.
What Are Some Cryptocurrency Pitfalls?
A known problem within the cryptocurrency industry is that due to pseudonymity, while all transactions are recorded in great detail, the identity recorded to those transactions can simply be an alias (a made up name). Thus, cryptocurrency has been tied to a variety of different criminal activities.
Another known issue to consider is that the money is in fact digital. Thus, if you forget or lose access to where the key codes or backups are stored like a hard drive, wallet or other device, those cryptocurrency funds may be lost. Like any asset there is potential benefit and risk when it comes to owning any instrument.