Cryptocurrencies; Digital Money
Cryptocurrencies are a form of digital digital currency and are the latest big thing in the world of finance. Like fiat or paper money, you can use them as a means of exchange.
Cryptocurrencies are decentralized; operating independently of banks and government, but can still be exchanged or speculated on just like any physical currency.
To define cryptocurrency in a more comprehensive term; it is a medium of exchange, created and stored electronically in the blockchain.
The system works by using encryption techniques to control the creation of monetary units and to verify the transfer of funds.
Bitcoin: The first
Bitcoin is the first and best known example. Cryptocurrencies are regulated by the principle of cryptography.
Unlike gold that is mined from the ground, cryptocurrency is an entry in a virtual ledger that is stored in various computers around the globe. These entries have to be ‘mined’ using mathematical algorithms.
A continuous link of these blocks is referred to as blockchain. Blockchain helps to keep records of all transactions that take place across the peer-to-peer network and it is this major innovation that allows the transfer of assets without the interference of a centralized third party.
Blockchain technology is the underlying technology behind cryptocurrencies has been around for a while, and more recently, numerous financial institutions, companies, and governments have begun exploring the potential use cases, along with the benefits associated with distributed ledger technology.
Following the appearance of Ethereum, people have begun to explore the potential uses of smart contracts. For those who do not know, smart contracts are computer programs capable of controlling digital assets by following the conditions set in place by prior agreement between two or more parties.
Traditional contracts work by outlining the main terms associated with a relationship between two or more parties, usually enforced by the law of the state that they’re being signed in. On the other side of the spectrum, smart contracts don’t set the terms, but instead make sure that once all conditions are met, they self-execute, thus removing the need of a middleman when carrying out various types of transactions.
The potential uses of smart contracts includes storing records, trading activities, automating mortgages, supply chain, real estate etc
The potential of smart contracts is virtually limitless, as they can easily automate a wide variety of industries, thus saving people time and money, while also improving security.
Conclusion – The Arrival of a New Age
Today, everyone is talking about cryptocurrency, it taking the world of currencies by storm, relegating fiat or paper money to the background. Cryptocurrency is now mentioned in the news daily as it surpasses major world currencies in value. It is now widely accepted across the globe as a means of payment and exchange.