By Selina Stoller, SAF Holdings, LLC
In the world of finance, cryptocurrencies have become increasingly popular. But what are they exactly?
Cryptocurrencies are digital or virtual currencies that use cryptography for security which is difficult to counterfeit.
They make it easier to transfer funds between two parties in a transaction which are facilitated through the use of public and private keys for security purposes. Transfers are done with little to no processing fees.
Cryptocurrencies are not issued by any central authority and are, in theory, immune to government interference. However, the anonymity of cryptocurrency transactions makes them well-suited for crimes like tax evasion and money laundering.
The first cryptocurrency to go public was Bitcoin in 2009 by a group known as Satoshi Nakamoto. As of September 2015, there were more than 14.6 million bitcoins in circulation with a total market value of $3.4 billion.
Bitcoin’s success launched a number of competing cryptocurrencies like Litecoin, Namecoin, and PPCoin.
Bitcoin uses what’s called blockchain, which is an online ledger of the transactions that have ever been conducted using bitcoins. This provides a data structure that is exposed to a limited threat from hackers and can be copied across all computers running Bitcoin software.
Because cryptocurrencies are virtual, digital balances can be completely wiped out by a computer crash if a backup copy doesn’t exist. They are also not immune to hacking.
Bitcoin has been subjected to more than 40 thefts including a some that exceeded $1 million in value.
However, many observers look at cryptocurrencies as hope that a currency can exist that preserves value, facilitates exchange, is more transportable than hard metals, and is outside the influence of central banks and governments.
- 19 Oct, 2017
- Josh Smith