What is cryptocurrency?
Cryptocurrency is a digital or virtual currency that is secured by cryptography.
Cryptocurrencies are generally not issued by any central authority, rendering them immune to government interference or manipulation. Instead, they leverage decentralized networks based on blockchain technology—a distributed LEDGER enforced by a disparate network of computers.
Many experts believe that blockchain and related technology will disrupt many industries, including finance and law.
*Blockchains are organizational methods for ensuring the integrity of transactional data --an essential component of cryptocurrencies.
Advantages
One of the advantages of cryptocurrencies is that they make it simpler to transfer funds directly between two parties, without requiring a third party like a bank or credit card company.
Instead, transfers are secured through the use of public keys and private keys as well as different forms of incentive systems, such as Proof of Work or Proof of Stake.
A user's wallet has a public key, while the private key is known only to the owner and is used to sign transactions. Fund transfers are completed with minimal processing fees, allowing users to avoid the lofty fees charged by banks and financial institutions for wire transfers.
Disadvantages
The semi-anonymous nature of cryptocurrency transactions makes them well-suited for a host of illegal activities, such as money laundering and tax evasion. However, cryptocurrency advocates often highly value their anonymity, citing benefits of privacy like protection for whistleblowers or activists living under repressive governments.
Cryptocurrency Security
Cryptocurrency blockchains are highly secure, but other aspects, like exchanges and wallets, are not insusceptible to the threat of hacking. In the past 10 years, several online exchanges have been the target of hacking and theft, sometimes with millions of dollars’ worth of "coins" stolen.
Nevertheless, many investors see potential advantages in cryptocurrencies, including the possibility of preserving value against inflation and facilitating exchange, while being easier to transport and divide than precious metals and existing outside the influence of central banks and governments.
