What is Cryptocurrency?
Cryptocurrency is a digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of this security feature. A defining feature of a cryptocurrency, and arguably its most endearing allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation.
Decentralized cryptocurrency is produced by the entire cryptocurrency system collectively, at a rate which is defined when the system is created and which is publicly known. In centralized banking and economic systems such as the Federal Reserve System, corporate boards or governments control the supply of currency by printing units of fiat money or demanding additions to digital banking ledgers. In case of decentralized cryptocurrency, companies or governments cannot produce new units, and have not so far provided backing for other firms, banks or corporate entities which hold asset value measured in it. The underlying technical system upon which decentralized cryptocurrencies are based was created by the group or individual known as Satoshi Nakamoto.
Cryptocurrencies are a potential tool to evade economic sanctions for example against Russia, Iran, or Venezuela. President Vladimir Putin has recently declared that legislation for a state-backed cryptocurrency is in the works. Cryptocurrency use could also be made difficult by restrictive regulations, in which case it is hard to determine what percentage of users would keep using the technology. A government that chooses to ban cryptocurrency could also make it illegal to hold or trade, resulting in the potential for severe financial losses.
Such digital currencies are also used in controversial settings in the form of online black markets, such as Silk Road. The original Silk Road was shut down in October 2013 and there have been two more versions in use since then; the current version being Silk Road 3.0. The successful format of Silk Road has been widely used in online black markets, such as the Agora marketplace.
How do people use cryptocurrency?
Cryptocurrency is used primarily outside existing banking and governmental institutions and is exchanged over the Internet. While these alternatives have expanded options for individuals, more traditional financial institutions still dominate the market for investing, borrowing and saving.
Bitcoin, created in 2009, was the first popular example and the most widely known. Since then, numerous other cryptocurrencies have been created. These are frequently called altcoins, as a blend of alternative coin.
Decentralized exchanges such as EtherDelta or Shapeshift enable the direct conversion of one cryptocurrency to another. Supported pairs can change frequently.
decentralized exchanges are strongly preferred over traditional exchanges for a number of reasons. They are resistant to government interference and manipulation, they offer greater security and privacy, and they allow users to be in control of their own funds.
Cryptocurrencies are generally considered to be very volatile, especially in the short-term. This means that prices can go up and down very rapidly, and it is not always easy to predict which way the market will go.
In conclusion, cryptocurrency for investment can be a risky proposition, but it can also be a very rewarding one. Those who take the time to learn about the market and understand the underlying technology can make a lot of money if they make the right decisions.