A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currency. Over the years, the human society has evolved in various ways, specifically due to technological development. Concerning the world’s monetary system, we have come a long way from the days of the barter system to the era of fait money (paper currencies). Fiat currencies have had many advantages because they don’t require physical commodity reserves and countries can control their own money supply. Moreover, currencies can be valued constantly against each other in floating exchanges system and the governments are generally trusted to be a central regulating force that ensures that transactions are fair, accurate, and not manipulated.
Today, with the advent of cheap computing power and networked systems (the Internet), there is a new contender to the currency game. The new “guy” that has changed the entire equation of the currency world is the cryptocurrency. The emergence of crypto currencies has led to the emergence of a full fledge digital economy. This new economy is growing ever stronger with the daily increase in the number of internet users especially for commercial purposes.
Cryptocurrencies exist only in computers. Fiat currencies also exist as numbers in a computer system and they require a distributed system to ensure integrity and reliability, sometimes, they have been a good alternative to national currencies. Such fiat currencies are, in the simplest terms, digital records held by many parties that track how much currency any single wallet holds.
Unlike fiat currencies, cryptocurrencies have the following features and benefits
Decentralization: Cryptocurrencies are not based in any single country or jurisdiction, because the ledgers and servers are spread out over the globe.
Deregulation: Since there is no central monetary authority, the system is distributed and therefore not easily manipulated either by large institutions or by any governments. This means that there is little regulation on who spends it, how much is spent, what to spent on and where to spent it.
Anonymity: users of cryptocurrencies are almost completely anonymous. This is because there is less private information attached to each transaction. There are some crypto currencies whose main goal is to provide an untraceable, secure, and anonymous means of payment.
The emergence of cryptocurrencies has brought its benefits, fears and doubt. However, the success of bitcoin which has become the leading cryptocurrency with a unit valued at over $4,000 indicates that something new and special has already has occurred in the currency world.
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