What are cryptocurrencies-WWNEED.COM
Cryptocurrencies are digital or virtual currencies that are backed by cryptographic systems, and that enable secure online payments without the use of third party intermediaries. The term “cryptography” refers to the various encryption algorithms and cryptographic techniques that protect these transactions such as elliptic curve ciphers, public-private key pairs, and hash functions.
Cryptocurrencies are bought on their designated exchanges. Although they are rarely used by e-commerce websites or in retail transactions, the high value of cryptocurrencies has made them one of the most popular trading tools.
What is Blockchain Technology?
Blockchain is basically a collection of a chain of blocks connected over the internet. Each block contains a set of transactions that have been independently verified by each member of the network, making transaction records nearly impossible to forge.
Experts say that blockchain technology can be used in multiple industries and operations such as online voting and crowdfunding. Financial institutions such as JPMorgan Chase & Co. (JPM) for example, using blockchain technology to lower transaction costs by streamlining payment processing.
Types of cryptocurrency
There are thousands of cryptocurrencies on the market today, with various characteristics and functions, but the most famous and popular one is Bitcoin that was invented by an unknown person named Satoshi Nakamoto and introduced to the world in 2008. Since then, Bitcoin has been the most popular cryptocurrency. Trading and Covering As there were over 18.8 million bitcoins in circulation with a total market capitalization of approximately $1.2 trillion as of November 2021.
In the wake of the success of Bitcoin, several other cryptocurrencies have been launched such as Solana, Litecoin, Ethereum, and Cardano. The total value of all existing cryptocurrencies as of November 2021, is over $2.1 trillion.
Are cryptocurrencies legal?
Fiat currencies derive their authority as a means of transactions from the government or monetary authorities, and each dollar bill is backed by the Federal Reserve. However, this does not apply to cryptocurrencies, as they are not backed by any public or private entities. This legal status of cryptocurrencies affects their use in daily transactions and trading.
There are some exceptions to this rule, El Salvador became the only country in the world that allows Bitcoin as legal currency for cash transactions as of December 2021, the Japanese Payment Services Act defines Bitcoin as legal property, and cryptocurrency exchanges in this country are subject to the collection of information about the customer And details regarding bank transfer, cryptocurrency is also completely legal in the European Union and the sale of the US states.
Advantages and disadvantages of cryptocurrency
The initial goal of cryptocurrency was to revolutionize the financial infrastructure, but as with every revolution, there are positives and negatives. Here are some of them:
Advantages
The new cryptocurrency system banishes central intermediaries such as banks and monetary institutions, eliminating the possibility of any crises like the one that erupted in 2008 due to the failure of institutions in the United States.
Cryptocurrencies facilitate direct money transfer between two parties without the need for a third party such as a bank or credit card company, which makes these transfers faster compared to traditional money transfers.
Cryptocurrency investments can be used to generate profits, Bitcoin has risen in value to nearly $862 billion in the crypto markets as of December 20, 2021.
Cryptocurrencies such as Bitcoin are used as intermediaries to simplify cross-border money transfers. Fiat currency is converted into Bitcoin or other cryptocurrency, then moved across the border and converted back into the destination fiat currency. This method simplifies the money transfer process and makes it cheaper.
Negatives
Although they claim to be an anonymous form of transaction, they leave a digital trail that can be decoded by agencies like the FBI. This opens up possibilities for governments or federal authorities to track the financial transactions of ordinary citizens.
Cryptocurrencies have become a popular tool for criminals to carry out criminal activities such as money laundering and the buying and selling of illegal purchases such as drugs.
In theory, cryptocurrencies are meant to be decentralized and their wealth distributed among the many parties on the blockchain. But it is in fact very concentrated as only 11,000 investors around the world own nearly 45% of Bitcoin.
One idea of cryptocurrency is that it can be mined by anyone using a computer with an internet connection. But in fact, the costs of mining are huge in terms of energy, which can sometimes be as large as the energy consumed by entire countries.
While crypto-blockchains are highly secure, other crypto-repositories, such as exchanges and wallets, can be hacked. Numerous cryptocurrency exchanges and wallets have been hacked over the years, and millions of dollars in coins have been stolen.
Cryptocurrencies in the public markets suffer from price volatility. Bitcoin experienced rapid rises and falls in its value, climbing as high as $17,738 in December 2017 .
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