Cryptocurrency is a digital form of currency whose transactions are legitimized by its users and verified through blockchain technology instead of being regulated by a central authority such as a bank. This allows it many advantages over government issued currencies and other kinds of digital cash such as security, transparency, anonymity, and convenience.
What is cryptocurrency?
Cryptocurrency is a form of digital currency that operates on blockchain technology. This simply means that its entire financial system is kept running through the efforts of a collection of individuals in an online network as opposed to being maintained by one entity or institution like a government or central bank.
This is why cryptocurrency is also known as “democratized” or “decentralized” finance, since its system does not depend on regulations, but rather on community consensus from all the network participants that are keeping the blockchain running.
The term itself draws a lot from “cryptography” from the Greek words “kryptós” and “graphein” which mean “secret” and “to write” respectively. Hence, cryptography roughly translates to “writing in secret” and reflects cryptocurrency’s reputation as an anonymous and super-secure public ledger network.
How is crypto different from other digital currencies?
- Crypto allows for users to transact directly with each other - A blockchain is essentially a peer-to-peer (P2P) network, which means that users can directly transact with one another without the need for an intermediary or middleman to oversee the process. This results in generally lower transaction fees which are charged only for the upkeep of the network nodes who are providing the computational power for the network.
- Crypto allows for anonymous transactions - Another advantage of a P2P network is that unlike online transactions via commercial bank portals or e-wallets that require details about who is sending and receiving money, blockchain technology allows users to establish their identities through digital signatures without the need to divulge any additional information, allowing for direct P2P transactions to take place freely and instantly.
- Crypto transactions are transparent and can be monitored by everyone - Whereas traditional banking platforms only limit users' access to their own transactions, a blockchain’s public ledger can be viewed by anyone at any time. This means that all of the supply of a particular cryptocurrency can be accounted for and all transactions are easy to trace.
- Cryptocurrency networks are decentralized - Since blockchains are distributed systems without a singular point for failure, they are much more reliable than centralized payment systems that may experience the occasional downtime. Blockchains rarely ever go down.
- Crypto blockchains are highly secure - Another advantage of decentralization is that it makes it practically impossible for anyone with malicious intent to assume control of the network. Because a majority consensus is needed to effect changes to a cryptocurrency’s ledger, it would require an astronomical amount of resources and computing power for a hacker to assume control of enough network computers to influence the consensus protocol.
- Crypto transactions are fast and convenient - Compared to sending money through traditional remittance channels which may take days and may also require a lengthy process of verification and security checks, cryptocurrency transactions are almost instantaneous and require only a few simple steps to send assets to someone’s wallet address.
Though cryptocurrency still remains a relatively new technology and there are still issues that need to be worked on such as price volatility, for the most part–crypto is already regarded by many as the “future of money”. With all the new discoveries and applications being made all the time, we can only wait to find out what other creative solutions will take place within this revolutionary new technology.
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DISCLAIMER: The statements in this article do not constitute financial advice. PDAX does not guarantee the technical and financial integrity of the digital asset and its ecosystem. Any and all trading involving the digital asset is subject to the user’s risk and discretion and must be done after adequate and in-depth research and analysis.
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