Cryptocurrency is a digitized asset that is distributed over several computers in a common network. The decentralized nature of this network protects it from any control by government regulators.
According to computer experts, any system that falls into the cryptocurrency category must meet the following requirements:
- There is no centralized authority and is managed through distributed networks.
- The system keeps records of cryptocurrency units and who owns them.
- The system decides whether new units can be created and, if so, decides on the conditions of origin and ownership.
- Ownership of cryptocurrency units can only be proven cryptographically.
- The system enables transactions to be carried out in which the ownership of the cryptographic units is changed.
Types of Cryptocurrency
The first type of cryptocurrency was Bitcoin, which is the most widely used, valuable, and popular to date. In addition to Bitcoin, other alternative cryptocurrencies with different functions and specifications have been created.
The competing cryptocurrencies that were created due to the success of Bitcoin are known as Altcoins. Some of the most popular altcoins are the following:
Today the added value of all existing cryptocurrencies is around 1.5 trillion dollars; Bitcoin currently accounts for more than 60% of the total value.
Advantages And Disadvantages of The Cryptocurrency
Cryptocurrency has the following advantages:
- Transferring funds between two parties is easy without the need for a third party such as credit/debit cards or banks.
- It is a cheaper alternative compared to other online transactions Payments are secure and offer an unprecedented level of anonymity modernity.
- Cryptocurrency systems come with a "wallet" or account address of the user that can only be accessed with a public key or pirate key.
- The private key is only known to the owner of the wallet and the money transfer takes place with minimal processing fees.
Cryptocurrencies have the following drawbacks:
- The almost hidden nature of cryptocurrency transactions makes them easily the focus of illegal activities such as money laundering, tax evasion, and possibly even terrorist financing. Payments are not irreversible.
- Cryptocurrencies are not widely accepted and have limited value.
- There are concerns about cryptocurrencies like Bitcoin are not rooted in a material good, but some research has shown that the cost of producing a bitcoin is directly related to its market price.