Cryptocurrency, a newly-emerging concept of money

Cryptocurrency emerged with the need for secure communication in World War II. It has evolved in the digital age with elements of mathematical theory and computer science to become a means of securing communication, information, and money online.

A cryptocurrency is a form of digital currency used in cryptography for the purpose of security to protect virtual transactions and control the creation of new units, and therefore it is difficult to counterfeit that currency, unlike national currencies issued by state banks, cryptocurrency exists only on the “World Wide Web” and is never minted in the form of coins or printed in the form of banknotes, but can be converted into local currencies via the services that support it.

*All information about the cryptocurrency is stored in a distributed ledger created using Blockchain technology. Anyone can view data related to financial transactions and wallet balances. Each new block contains records of completed transactions, commission fees, and other service information. The process of creating new blocks is called digital mining, i.e. decoding the block mathematically through computer resources.

Different types of cryptocurrency:

1- Payment cryptocurrencies or electronic payment system currencies:

Their purpose is to pay for goods and services and can serve as an investment. They are completely decentralized, anonymous, and easy to use. The most famous of these cryptocurrencies is Bitcoin.

2- Codes for the internal system of the blockchain:

The most popular cryptocurrency platform is Ethereum. In addition to its main purpose, ETH is used as electronic money along with Bitcoin. People are investing in the infrastructure of the Ethereum network, confident that they are not investing in the marketing trap, but are raising their capital by contributing to the development of innovative projects.

3- Cryptocurrencies for trading platforms and other platforms for different services:

It offers a token that has an important value within the platform, such as BNB, the currency of the Binance platform, which if you pay the trading fees in that currency, you will get special discounts. Reputable crypto exchanges issue their own digital currency. Thus, the management accelerates the turnover of funds and increases the liquidity of unknown assets on its trading floor. Users can at any time sell their cryptocurrency for an exchange token, with minimal service fees, which significantly reduces the risk of investing in small projects. The digital currencies of cryptocurrency exchanges are completely centralized networks. And, this is the main difference between them and traditional cryptocurrencies.

4- Utility Tokens:

Also called App Coins. It is released in limited volume via the ICO process. After completing a fundraising campaign for the project, Blockchain project teams sometimes try to promote it as an investment option. But this practice is now strictly regulated by the US Securities and Exchange Commission. So, for a successful investment, you need to be an expert in the field of economics.

More types of cryptocurrencies:

5- Security tokens:

The latter is directly analogous to securities. It is distributed among investors to enhance the financial security of investments. A security token is a type of digital token that each shareholder receives. On the basis of crypto-tokens, dividend payments are distributed, and they themselves can be invested in other projects. The right of the owner of the STO is registered in a smart contract, and the tokens themselves are sold on the trading platforms. STO turnover is controlled by financial regulators such as the US Securities and Exchange Commission (SEC) or the Swiss Financial Markets Authority (FINMA).

6- Crypto Commodities:

The generic name of an asset traded or exchanged in the real or virtual world, which can be acquired through the blockchain network using exclusive digital tokens. Crypto-commodity tokens are used to pay for hosting on a remote server, media content, and other goods and services within a particular platform. For example, the Aeron Blockchain Network’s cryptocurrency can be used to pay for access to an air travel security database. Self-regulation and execution of financial transactions in Crypto Commodities are embedded in the program code in the form of a smart contract. Unlike platform currencies, crypto-commodity tokens are never used as regular money outside of the project.

7- Stablecoin:

 It is the digital currency with the least volatile nature because its value is always tied to a physical asset. The stablecoin issuing company must have an amount in the fiat funds, for example, US dollars, in the balance of the reserve fund in order to guarantee the value of the token. The most popular currency of this type is Tether or USDT, but there are other stablecoins backed by the dollar and the euro.

Pros and cons of cryptocurrency:-

Advantages :

1. Protection from inflation

Inflation has caused many currencies to get their value declined with time. Almost every cryptocurrency, at the time of its launch, is released with a fixed amount. There are only 21 million Bitcoins released in the world. So, as the demand increases, its value will rise which will keep up with the market and, in the long term, prevent inflation.

2. Decentralization and Self-Management

One of the most important advantages is that the decentralization of cryptocurrency. this suggests that there’s no central control authority within the network and also implies a peer-to-peer procedure. an immediate consequence of this is often that there’s no institution to work out rules for cryptocurrency owners, nor the cryptocurrency flow and value – which isn’t the case of fiat currencies that are controlled by the government.

3. Privacy and security

There have always been major concerns for cryptocurrencies. The blockchain ledger is predicated on different mathematical puzzles, which are hard to decode. This makes a cryptocurrency safer than ordinary electronic transactions. Cryptocurrencies, for better security and privacy, use pseudonyms that are unconnected to any user, account, or stored data that would be linked to a profile.

Disadvantages :

1. No Refund Policy – Scams

One of the most important cons is that there’s no refund policy for cryptocurrencies: if you mistakenly pay someone, there’s nothing to ensure that you’ll get your money back. Also, the shortage of refund policy makes it easier to fraud people.

2. Can be used for illegal transactions

Because it’s difficult for the government to track down any user by their wallet address or keep tabs on their data.

Last but not least, it’s important to understand the potential for large losses, so try to be careful when you use any kind of cryptocurrency.

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