What are Cryptocurrencies? Cryptocurrencies are digital tokens. They are a type of digital currency that allows people to make payments directly to each other through an online system. Cryptocurrencies have no legislated or intrinsic value; they are simply worth what people are willing to pay for them in the market.
In simple words, blockchain in the context of cryptocurrency is a digital ledger whose access is distributed among authorized users. This ledger records transactions related to a range of assets, like money, house, or even intellectual property.
The access is shared between its users and any information shared is transparent, immediate, and “immutable”. Immutable means anything that blockchain records are there for good and cannot be modified or tampered with – even by an administrator.
Cryptocurrency is a type of currency that uses digital files as money. That seems easy enough, right? It’s decentralized, which means no one person or entity controls it. This type of currency is secured by cryptography, making it nearly impossible to counterfeit or double-spend. There are a few popular cryptocurrencies you might have heard of, like Bitcoin or Ethereum.
Many cryptocurrencies are decentralized networks based on blockchain technology. Blockchain is a ledger database, or record-keeping technology. These blockchains keep track of the existence of cryptocurrencies. It stores information differently than a typical database.
Blockchains store data in blocks, and chain them together. Think about it like this: as new data enters, it goes into a block. When that block is filled up with data, it’s chained onto the previous block. So it stores the information chronologically, or in the right order.
Since it’s decentralized, no one person or group has control over it, but rather all users collectively retain control. The data entered into blockchains is permanent and irreversible. For cryptocurrencies, this means transactions are permanently recorded and anyone can view it.
How Does Cryptocurrency Work?
Cryptocurrencies are not controlled by the government or central regulatory authorities. As a concept, cryptocurrency works outside of the banking system using different brands or types of coins – Bitcoin being the major player.
- Mining
Cryptocurrencies (which are completely digital) are generated through a process called “mining”. This is a complex process. Basically, miners are required to solve certain mathematical puzzles over specially equipped computer systems to be rewarded with bitcoins in exchange.
In an ideal world, it would take a person just 10 minutes to mine one bitcoin, but in reality, the process takes an estimated 30 days.
- Buying, selling, and storing
Users today can buy cryptocurrencies from central exchanges, brokers, and individual currency owners or sell it to them. Exchanges or platforms like Coinbase are the easiest ways to buy or sell cryptocurrencies.
Once bought, cryptocurrencies can be stored in digital wallets. Digital wallets can be “hot” or “cold”. Hot means the wallet is connected to the internet, which makes it easy to transact, but vulnerable to thefts and frauds. Cold storage, on the other hand, is safer but makes it harder to transact.
- Transacting or investing
Cryptocurrencies like Bitcoins can be easily transferred from one digital wallet to another, using only a smartphone. Once you own them, your choices are to:
| a) Use them to buy goods or services |
| b) trade in them |
| c) exchange them for cash |
If you are using Bitcoin for purchases, the easiest way to do that is through debit-card-type transactions. You can also use these debit cards to withdraw cash, just like at an ATM. Converting cryptocurrency to cash is also possible using banking accounts or peer-to-peer transactions.
Conclusion
As a conclusion, crypto currencies will be very attractive to terrorist organizations when it will reach a combination of high anonymity or low traceability (to prevent identification of transaction senders/receivers), currency stability (to minimize the risk of loss of money invested into the crypto currency) and