Created through Blockchain Technology, cryptocurrency is a medium of exchange, created and stored electronically in the blockchain, using encryption techniques to control the creation of monetary units and to verify the transfer of funds.
- No Intrinsic Value – it is not redeemable for any other commodity such as gold or silver, The coin is not created with a given value like FIAT currencies are. The price is determined by the supply and demand of those who choose to use the currency.
- Has no physical forms and only exists as data on a network. You can not hold these currencies in your hand like paper currencies. You can only access through the network of the currency.
- Its supply is not determined by any centralized organization such as a bank which would control the currency.
- Increased transparency – the ability to see tranaction details.
- Accurate ledger – keeps all transaction data on an open source ledger.
- Permanent ledger – the ledger will contain all the data permanently.
- Cost reduction – minimal transaction fees as opposed to those charged by traditional banks and centralized organizations.
- Faster peer to peer transactions that can take seconds to complete as opposed to traditional methods of transfer that take days to complete.
- There are no banks to deal with when you initialize a transfer to a peer.
- Self regulating
- User adoption – it is unsure how the masses will look at cryptocurrencies and whether they will be interested to use these as a replacement of traditional currency.
- Complex technology which is not easily understood by the non-tech savvy individuals. Even some of the technologically knowledgeable population have to learn a hole new technology.
- Regulatory implications – at this time regulation by local governments vary with very little clarification. It is unclear if governments will classify cryptocurrencies as currency, or commodities. It is not determined if transactions made through cryptocurrencies will be subject to tax, industry regulation and more.
- Implementation challenges – if there need to be changes to the technology underlying the currency or the currency itself, it is a difficult task as the users have to come together and determine what changes to make and how to implement them.
Bitcoin – the first cryptocurrency:
Bitcoin was the first cryptocurrency created using blockchain technology. It has been the most popular and valuable cryptocurrency to date and has attracted many followers and enthusiasts. There are at this time more than 100 different cryptocurrencies being used.