What is cryptocurrency and how does it work?

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.
Cryptocurrency, sometimes called crypto-currency or crypto, is any form of currency that exists digitally or virtually and uses cryptography to secure transactions.
Cryptocurrencies do not have a central issuing or regulating authority, instead using a decentralized system to record transactions and issue new units.

What is cryptocurrency?

Cryptocurrency is a digital payment system that does not rely on banks to verify transactions. It’s a peer-to-peer system that can enable anyone anywhere to send and receive payments.

Instead of being physical money carried around and exchanged in the real world, cryptocurrency payments exist purely as digital entries to an online database describing specific transactions. When you transfer cryptocurrency funds, the transactions are recorded in a public ledger.
Cryptocurrency is stored in digital wallets. Cryptocurrency received its name because it uses encryption to verify transactions. This means advanced coding is involved in storing and transmitting cryptocurrency data between wallets and to public ledgers.
The aim of encryption is to provide security and safety. The first cryptocurrency was Bitcoin, which was founded in 2009 and remains the best known today.
Much of the interest in cryptocurrencies is to trade for profit, with speculators at times driving prices skyward.

How does cryptocurrency work?

Cryptocurrency is digital money that does not require a bank or financial institution to verify transactions and can be used for purchases or as an investment.
Transactions are then verified and recorded on a blockchain, an unchangeable ledger that tracks and records assets and trades. The access is shared between its users and any information shared is transparent, immediate, and “immutable”. Immutable means anything that blockchain records is there for good and cannot be modified or tampered with – even by an administrator Cryptocurrencies are supported by a technology known as blockchain, which maintains a tamper-resistant record of transactions and keeps track of who owns what. The use of blockchains addressed a problem faced by previous efforts to create purely digital currencies: preventing people from making copies of their holdings and attempting to spend it twice. Individual units of cryptocurrencies can be referred to as coins or tokens, depending on how they are used. Some are intended to be units of exchange for goods and services, others are stores of value, and some can be used to participate in specific software programs such as games and financial products.

benefits of cryptocurrency?

The benefits of cryptocurrencies include cheaper and quicker money transactions and decentralized systems that do not fail at a single point.

1) Transaction speed

If you want to send someone money in the United States, there are few ways to move money or assets from one account to another faster than you can with cryptocurrency. Most transactions at U.S. financial institutions settle in three to five days. A wire transfer usually takes at least 24 hours. Stock trades settle in three days.

But one of the advantages of cryptocurrency transactions is that they can be completed in a matter of minutes. Once the block with your transaction in it is confirmed by the network, it’s fully settled and the funds are available to use.

  1. Transaction costs

The cost of transacting in cryptocurrency is relatively low compared to other financial services. For example, it’s not uncommon for a domestic wire transfer to cost $25 or $30. Sending money internationally can be even more expensive.

Cryptocurrency transactions are usually less expensive. However, you should note that demand on the blockchain can increase transaction costs. Even so, median transaction fees remain lower than wire transfer fees even on the most congested blockchains.

  1. Accessibility

Anyone can use cryptocurrency. All you need is a computer or smartphone and an internet connection. The process of setting up a cryptocurrency wallet is extremely fast compared to opening an account at a traditional financial institution. There’s no ID verification. There’s no background or credit check.

Cryptocurrency offers a way for the unbanked to access financial services without having to go through a centralized authority. There are many reasons a person may be unable or unwilling to get a traditional bank account. Using cryptocurrency can allow people who don’t use traditional banking services to easily make online transactions or send money to loved ones.

  1. Security

Unless someone gains access to the private key for your crypto wallet, they cannot sign transactions or access your funds. However, if you lose your private key, there’s also no way to recover your funds.

Furthermore, transactions are secured by the nature of the blockchain system and the distributed network of computers verifying transactions. As more computing power is added to the network, it becomes even more secure.

Any attack on the network and attempt to modify the blockchain would require enough computing power to confirm multiple blocks before the rest of the network can verify the ledger’s accuracy. For popular blockchains such as Bitcoin(CRYPTO:BTC) or Ethereum(CRYPTO:ETH) that kind of attack is prohibitively expensive.

Instances of hacked cryptocurrency accounts are usually tied to poor security at a Centralized Exchange. If you keep your crypto assets in your own wallet, it’s far more secure.

  1. Privacy

Since you don’t have to register for an account at a financial institution to transact with cryptocurrency, you can maintain a level of privacy. Transactions are pseudonymous, which means you have an identifier on the blockchain — your wallet address — but it doesn’t include any specific information about you.

This level of privacy can be desirable in many cases (both innocent and illicit). That said, if someone connects a wallet address with an identity, all of the transaction data is public. There are several ways to further mask transactions, as well as several coins that are Privacy-Focused to enhance the private nature of cryptocurrency.

  1. Transparency

All cryptocurrency transactions take place on the publicly distributed blockchain ledger. There are tools that allow anyone to look up transaction data, including where, when, and how much of a cryptocurrency someone sent from a wallet address. Anyone can also see how much crypto is stored in a wallet.

This level of transparency can reduce fraudulent transactions. Someone can prove they sent money and that it was received or they can prove they have the funds available for a transaction.

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)

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