What Is Cryptocurrency?
You might think that cryptocurrencies are a really difficult thing to understand, but that is not so at all. In simplest terms, a cryptocurrency is an online form of money, or in other words, a digital form of money used to trade and perform transactions. Unlike bank notes or coins, cryptocurrencies are not a physical thing. You cannot pick them up and touch them. They only exist in the online world. Let’s do our best to answer the question of what is cryptocurrency?
Cryptocurrencies are actually a subset of digital currencies. Yes, there is more than one type of digital currency, with cryptocurrencies being a category of them. The big difference is that digital currencies, up until 2009, were totally centralized. This could be something as simple as a gift card with a certain amount of money stored on it, which is controlled by the company which the gift card is for. In other words, the amount of money created and spent is strictly controlled and monitored by whoever is in charge. Another example of this would be the Federal Reserve System which controls the amount of national currency that is printed.
The difference is that cryptocurrencies are decentralized, which means that they are not controlled by one central body or authority. The main takeaway here is that cryptocurrencies like Bitcoin are not created by one authority, but are created, used, controlled, and monitored by the entirety of the cryptocurrency community. This is something that we will explain in our section about the creation and storing of cryptocurrencies.
Various cryptocurrencies have become a financial phenomenon as of late. About 2 years ago, you would have never been able to find any kind of academic study, journal, or really any kind of solid research on cryptocurrencies. However, this has all changed in the last year or so. These cryptocurrencies have been drastically increasing in volume and in value, with the big hit being Bitcoin right now. As these crytpocurrencies have grown in volume and value over the last year, so has their influence in the financial world.
Banks, investment firms, traders, and even retailers have begun to see that there is great economic and buying power present in these cryptocurrencies, and thus they are becoming a normal part of our world and how we engage in financial transactions. Cryptocurrencies like Bitcoin are more readily being used as forms of payment and for trading too. Over the bast few months there have been many banks, retailers, and other institutions which have begun to accept cryptocurrencies as a legit form of currency with real value.