A cryptocurrency is a virtual currency that uses cryptography for security. 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.
Cryptocurrencies such as Bitcoin, Litecoin and Etherium provide us with alternative ways of exchanging goods and services in transactions through the process of mining. Cryptocurrency transactions are generally anonymous and secure. You can use cryptography to ensure nobody can track who you send money to or where it goes (unless they know your public key).
The term “cryptocurrency” came about in 2009 when someone released a paper under the pseudonym Satoshi Nakamoto discussing the idea of digital currency. Bitcoin was the first cryptocurrency to begin trading, an incredible breakthrough as traders can freely trade them on open markets.
In this day and age, banks take longer to process transactions due to heightened security measures. With blockchain technology, transactions can be processed almost immediately or within a few minutes. It allows traditionalists and financial institutions alike to embrace this new approach because it will save time and money in the future when transferring funds internationally or domestically.
Blockchain technology has laid a strong foundation for a revolution in online transactions that will continue gaining speed as cryptocurrencies become more widely used in society over time.
Benefits of using cryptocurrency
Governments can’t control cryptocurrencies
As any government does not control cryptocurrency, you can use it in transactions without being traced – something that’s not possible with physical currency. It has massive benefits for citizens living under oppressive regimes or where corruption is rife; they no longer have to worry about their transactions being tracked by the authorities, which will allow them to protect their financial privacy.
Almost instantaneous transactions
Transactions made through blockchain technology are speedy compared to traditional online payment systems. All transfers are carried out simultaneously across the cryptocurrency network and verified in a public ledger via cryptography, ensuring security, privacy, and accuracy.
Lower transactional fees
Since there are no banks involved with cryptocurrency, you don’t have to pay hefty transaction fees. Unlike physical currency, you won’t have to pay for moving your money around the world to different accounts or withdraw it from an ATM.
No risk of duplication
Cryptocurrency is highly secure because there’s no chance of duplication. You can only spend your digital coins once, which minimizes the risk of theft and fraud compared to using debit cards, credit cards or even PayPal. The blockchain protects all transactions by recording them in a public ledger, so users are solidified with peace of mind knowing their funds are safe at all times.
Drawbacks of cryptocurrencies
Cryptocurrency is not yet widely accepted
One of the main drawbacks of cryptocurrencies at this moment in time is that they’re still not widely accepted by many online retailers and physical businesses. Only a small amount of shops, restaurants and companies accept it as payment, and there’s a good chance you won’t come across any who do when travelling out of town or country.
High price volatility
Cryptocurrencies are volatile and unpredictable, making them difficult to use for transactions. Their prices change on almost a daily basis, so they don’t provide much security or predictability when planning financially.
No protection from inflation
As any central authority doesn’t control cryptocurrencies, their value isn’t protected by any government, so they can suffer high inflation rates, which decreases their value. It is the opposite effect of physical currencies, which the government usually controls to combat inflation.
Cryptocurrencies for criminals and terrorists
Since cryptocurrencies aren’t regulated, they’re becoming more popular with criminals who want to use them in transactions on the dark web. Terrorist groups are also beginning to use cryptocurrencies because it provides them with a method of funding that doesn’t leave a trail when using digital currencies such as Bitcoin.
Trading with cryptocurrencies
Since transactions are almost instantaneous because there’s no third party involved, many people choose to make them online. You can also use cryptocurrencies to transfer money digitally across borders or trade with other users who have holdings. Cryptocurrencies are often traded on exchanges that allow you to buy and sell them according to the market price.
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