Cryptocurrencies have achieved the status of a global phenomenon and while many people do not fully understand the rising prominence, major financial institutions have highlighted the importance and criticisms of cryptocurrencies.
Cryptocurrency emerged as a side product of another invention by the anonymous person(s) known by the name Satoshi Nakamoto. Satoshi Nakamoto developed a ‘Peer to Peer Electronic Cash System’ intended at prevent double spending and managed to create the first cryptocurrency known as Bitcoin. Cryptocurrency however is more than just the well-known Bitcoin, and as a concept has achieved both admiration and trepidation all over the globe.
What is Cryptocurrency?
Cryptocurrencies are alternate currencies that do not have a physical form, and are traced by their information or transactional details that have been coded from untraceable cryptography codes. Usually, this kind of currency is not controlled by a government, so its value is only determined by the market price.
A cryptocurrency only has value in its exchange (it has no inherent value) much the same as a ‘conventional’ currency. Cryptocurrency is only worth what someone will exchange for it. There is no Federal Reserve to issue new digital currency, theoretically making it more stable.
A unit of cryptocurrency such as Bitcoin, is nothing but network of peers where every peer has a complete history of all transactions and thus balance of that Bitcoin. This record of all transactions is what is known as a ‘blockchain’.
All transactions are confirmed only by ‘miners’ whose only job is to take transactions, stamp them as legit and spread the network for which they are rewarded with a token of the cryptocurrency.
Cryptocurrency transactions are fast, global and irreversible. Which means that since they are internet based transactions, cryptocurrency is present in all over the globe except Iceland. All transactions are irreversible, and there is less scope of revert once a transaction is made.
Cryptocurrency funds are locked in public key cryptography system and permission is not required to download and use the software that cryptocurrency trades on
What are the advantages of Cryptocurrency?
Fraud and Identity Theft – Individual cryptocurrencies are digitally coded using cryptography and cannot be counterfeited. Moreover, neither transactions nor accounts are connected to real world identities.
Lower Fees – There are almost no fees in the transaction as the miner is compensated by the network. However, it is interesting to note that some of the third-party platforms that hold cryptocurrencies may charge transactional fees.
Greater Access and Universal Recognition – Platforms for trading cryptocurrencies are widely available with anyone having at the least an internet connection and a compatible device. Also, cryptocurrency is not bound my market exchange rates, interest rates or any transactional charges and therefore can be used at an international level.
Decentralization – A global network of computers use blockchain technology to jointly manage the database that records Bitcoin transactions. That is, Bitcoin is managed by its network, and not any one central authority. Decentralization means the network operates on a user-to-user (or peer-to-peer) basis.
What are the disadvantages of Cryptocurrency?
Lack of widespread adoption – Due to less awareness of cryptocurrency, it’s not a majorly accepted entity, which causes thin markets and volatility.
Capacity Limits – Supply of cryptocurrencies are generally limited by protocol. For example, there are only 21 million Bitcoins that can be mined in total. Once miners have unlocked this many Bitcoins, the planet’s supply of such currency will drought out unless the protocol is altered to allow a larger supply.
The change in market trends is already happening; cryptocurrencies are said to already be a step in changing the world manages their finances. Nearly every day new cryptocurrencies emerge, old die, early adopters get wealthy and investors lose money. Every cryptocurrency comes with a promise, mostly a big story to turn the world around. Few survive the first months, and most are propelled and dumped by speculators. Note: The information should not be construed as legal or other advice as it designed as an information source only © More Group 2018. All rights reserved.