What is Cryptocurrency? Why is They Becoming Popular?by Andrew Jones Forex Trader
These are a couple of questions that are being asked by a lot of users who are still not aware of the transforming nature the cryptocurrencies have on the financial technology. To answer what is cryptocurrency, it must be said that these are a type of digital currency that uses cryptography for security and anti-counterfeiting measures.
In cryptocurrency, public and private keys are often used to transfer cryptocurrency between individuals. Additionally, as a counter-culture movement that is often connected to cypherpunks, cryptocurrency is essentially a fiat currency. Thus, users must reach a consensus about cryptocurrency's value and use it as an exchange medium.
It is interesting to know what cryptocurrency is; however, it must be understood that it is not like any fiat because it is not tied to a particular country, its value is not controlled by a central bank. For instance, with Bitcoin, the leading functioning example of cryptocurrency, value is determined by market supply and demand.
Cryptocurrencies behave much like precious metals, like silver and gold. However, these are not commodities as these have exchange value like any other currency out there in the market. Though various authorities in the US consider Bitcoin and other cryptocurrencies as commodities for taxing purposes, it is still debatable if cryptocurrencies are commodities.
Cryptocurrency Explained for laymen
Though there can be various opinion about the cryptocurrencies and their legality, there should not be any confusion regarding the nature of these. Even Gavin Andresen who was associated with Bitcoin says that cryptocurrency is designed to bring back a "decentralized currency of the people," taking centralized banks out of the equation.
He is of the view that because Bitcoins must be cryptographically signed each time they are transferred, each Bitcoin user has both public and individual private keys. Thus, cryptocurrency transactions are anonymous, untraceable and have created a niche for illegal transactions, like drug trafficking.
Nonetheless, because the currency has no central repository, law enforcement and payment processors have no jurisdiction over Bitcoin accounts. It appears crystal clear that for cryptocurrency supporters, this anonymity is a primary strength of this technology, despite the potential for illegal abuse, as it enables a shift in power from institutions to individuals.
Thus, what is cryptocurrency has been defined excellently in the article. Now that you know the fundamental nature of the digital currencies you can start using them as well by buying them from some exchange; however, for that you must have a Bitcoin wallet.
Created on Dec 31st 1969 19:00. Viewed 0 times.
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