Investments in cryptocurrency assets are becoming increasingly promising. The turnover of the global cryptocurrency market in 2021 amounted to $1782 billion. Cryptocurrency assets are owned by more than 300 million users worldwide.
More than 18,000 companies already accept payments in crypto coins. In this review, we will analyze what cryptocurrency is, how it works, what are its advantages, what opportunities does it provide?
What is cryptocurrency?
Cryptocurrency is a digital means of payment . It is based on a code that cannot be changed or hacked. In fact, such a currency has no material analogue and exists only on the Internet.
In simplified form, it is a number that is recorded in a cryptographic database. The idea of creating digital money based on a mathematical code arose back in 1983. But it was embodied in 2009, when Bitcoin was created (from the English bit and coin).
Bitcoin is the most expensive and popular crypto asset in the world. It is noteworthy that the essence of cryptocurrencies is still being debated. Some scientists claim that crypto coins are a type of electronic money.
Others believe that they should be defined as a money substitute. Both positions are quite reasonable, since crypto assets have the following features:
- virtuality – payments and savings in “crypto” are possible only via the Internet;
- anonymity – it is impossible to identify the owners, since transactions with cryptocoins are encrypted with software code;
- independence from national currencies of states, lack of real security;
- Decentralization eliminates the possibility of government intervention.
Decentralization means the absence of a single regulator, which is not the case with conventional fiat currencies. The emission (issue) of “fiat” is controlled by central banks and governments. They decide how much paper money to print, regulate operations with their currency, etc.
For example, the US dollar is controlled by the Federal Reserve, the euro by the European Central Bank. The issuance of most cryptocurrencies, so-called “coins”, is decentralized. Millions of users around the world participate in the process of their issuance and circulation.
The computers of the “coin” owners are united into a network where there is no central regulator. All work on accounting and storing the history of transactions with a specific crypto coin is distributed among the network participants.
What is blockchain in cryptocurrency?
Most crypto assets are based on blockchain technology (block, chain). Blockchain is a constantly growing digital registry or log of records based on blocks.
This journal stores information about all transactions with a specific cryptocurrency. Let’s say a hypothetical user Alex buys 1 BTC on a crypto exchange. At this point, a record about the change of the coin’s owner appears in the Bitcoin blockchain.
It remains in the current block forever for all participants in the system. Alex can sell BTC, exchange for other coins, buy real estate, for example, in Singapore. Information about all these transactions will remain in the registry.
There are 5 principles underlying blockchain technology.
- Distributed database. Users have direct access to the database history, but cannot control it.
- Peer-to-peer data transfer. Information is transferred through peer-to-peer nodes. Each of them stores and transmits data to all other nodes.
- Transparency and anonymity. Each transaction (deal) is visible to everyone who has access to the system. Users have unique identification codes. At the same time, they can remain anonymous.
- Irreversibility of records. Once records of transactions are entered and updated, they cannot be changed in the register. All transactions are linked together in a chain.
- Computational logic. Blockchain transactions are programmed.
Thus, the blockchain registry is publicly accessible and decentralized. It exists simultaneously on millions of user computers connected to the cryptocurrency network.
Blockchain cannot be hacked. The data entered into it cannot be changed either. The information is protected using a system of blocks and cryptography (encryption).
Conclusion:
Cryptocurrency is revolutionizing the financial world with its decentralized, secure, and transparent approach to transactions. Unlike fiat currencies controlled by central authorities like the Federal Reserve or European Central Bank, cryptocurrencies are issued through a decentralized network of millions of computers. This independence from centralized regulation offers unparalleled transparency and security, making it a transformative force in finance.
Blockchain technology, the foundation of most cryptocurrencies, ensures that every transaction is permanently recorded in a public, unalterable ledger. This technology guarantees transparency and immutability, as seen in Bitcoin’s enduring popularity and usage worldwide. The decentralized nature of blockchain means no single entity can alter the records, offering unprecedented trust in financial dealings.
The growing adoption of cryptocurrencies—used by over 300 million people and accepted by 18,000 companies globally—highlights the vast opportunities they present. From anonymous transactions to secure digital payments, cryptocurrency is reshaping the future of global trade and investments.
If you need any further information about this topic, so contact us by our contach us page.
