Cryptocurrencies are the latest buzzword in the industry and many believe that they are the future. The technologies used in cryptocurrency transactions can make all kinds of financial transactions very secure and reduce the number of fraudulent interactions. Cryptocurrencies are still an unfamiliar concept for many prospective investors and business owners. Most are intimidated by this concept and have a limited understanding of its potential. Heres a brief look at cryptocurrencies:
What is cryptocurrency？
A cryptocurrency is made up of digital lines of encrypted code with monetary value. The currency is fully digital and operates on a blockchain platform, which helps keep all transactions secure and legal. The cryptocurrency system has the potential to be much more refined and secure than the existing Fiat currency system involving dollars and pounds, which is why many people consider it to be the future of the finance industry. All cryptocurrencies are made from encrypted digital lines of code based on solid mathematical principles.
The history of cryptocurrency
The first cryptocurrency to be introduced to the market was Bitcoin. Bitcoin introduced in 2009 and developed by an individual or group of individuals operating under the pseudonym of Satoshi Nakamoto.
Since then, several alternative coins or “Altcoins” have emerged and are thriving in the cryptocurrency market. After Bitcoin, Namecoin was introduced followed by Litecoin and Peercoin. All of these coins operate on similar blockchain platforms that ensure theyre legitimate and have value.
Difference between regular Fiat currency markets and cryptocurrency markets
The main characteristic of the cryptocurrency market is its decentralised nature. Theres no central controlling authority that can influence it. For example, central banks and governments influence the value of Fiat currencies like USD or Euro. The value of cryptocurrencies like Bitcoin is influenced purely by market conditions and a singular authority has no impact.
The cryptocurrency market is also designed to reduce the number of coins in circulation and increase the market cap value of them. The same cant be said for Fiat currencies because central authorities like the governments keep adding currencies to the market, therefore increasing inflation.
Additional coins are created through a mining process in the blockchain. Every transaction has to go through the request, process, authorisation, and recording stages in order to validated which ensures there are no sudden influx of coins in the market.
The blockchain technology records every transaction made and stores it in a permanent ledger. It creates digital contracts and transfers the coins from one party to another. It is very difficult to perform fraudulent transactions on this platform because every piece of encrypted data is unique and a matter of permanent record.
Cryptocurrencies in the future
There‘s a lot of potential for cryptocurrencies in the future because they’re a part of an offshore and decentralised system. The money can‘t be censored or seized, which makes it one of the most secure ways to protect one’s financial health. Coins like Bitcoin arent considered money or currency in legal terms.
Theyre considered assets and many governments in the world, including the US, tax them as such. In the future, governments will introduce more regulations and legal safeguards to make the cryptocurrency market more secure and comfortable.
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