What is Cryptocurrency?

by Sean Ross

1 min read

Cryptocurrency is a form of currency independent of any central bank that relies on data encryption for security. Because cryptocurrency is digital, it does not have a physical form. A block chain is typically used with cryptocurrency to store transactional information relating to the parties. This online ledger creates a data warehouse that monitors cryptocurrency ownership. Without this data, all balances of participants would be unknown. In addition, the holders of cryptocurrency remain fairly anonymous, making it an attractive alternative for private transactions as government-backed currencies are more regulated. Compared to other forms of currency, cryptocurrency is easier to transfer. It is easier to transport than precious metals and does not have the physical security issues of transferring paper money. Plus, it lays outside the realm of government or private control. In fact, a major influence of the creation of cryptocurrency such as Bitcoin ties to the desire of having a currency uncontrollable by a central authority, which is a function of most other currencies. Instead, the balance of cryptocurrency typically relies on the peer-to-peer network of users. The major downside to cryptocurrency translates to a unique issue called double spending. Because the currency is digital, it is easier to reproduce the underlying data. While physical currency can be counterfeit, cryptocurrency can be copied and multiple reiterations can be spent. Therefore, currencies backed by governments are considered more secure. For this reason, acceptance of cryptocurrency is not as widespread as other forms of currency.

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