A crypto currency is a type of digital or virtual currency that uses encryption to protect it from counterfeiting or duplicate spending. Block chain technology, a distributed ledger enforced by a dispersed network of computers, is the foundation of many crypto currency decentralized networks. The fact that crypto currencies are often not issued by any central authority makes them potentially impervious to intervention from or manipulation by governments.
TYPE OF BIT COIN
The most well-known and valued cryptocurrency is bit coin. It was created by Satoshi Takemoto, who went uncredited, and distributed a white paper introducing it to the public in 2008. Thousands of crypto currencies are available on the market right now.
Each cryptocurrency asserts that it has a unique purpose and specification. Banks use Ripple’s XRP to enable transactions between different geographical areas.The most traded and covered cryptocurrency is still bit coin, which was made accessible to the general public in 2009. Over 19 million bit coins were in use as of May 2022, valued at a total of over $576 billion. Never will there be more than 21 million bit coins.
Many new crypto currencies, known as “althorns,” have been established in the aftermath of Bit coin’s breakthrough. Some of these are Bit coin clones or forks, while others are completely new currencies. Solana, Lite coin, Ethereal, Cardamom, and EOS are among them. By November 2021, the entire value of all cryptocurrencies in existence had surpassed $2.1 trillion, with Bit coin accounting for roughly 41% of that total value.
- In terms of money, cryptocurrencies represent a brand-new, decentralized paradigm. In this system, transactions between two parties are governed by trust rather than by centralized intermediaries like banks and financial institutions. In light of this, a system based on cryptocurrency eliminates the chance of a single point of failure, such as a major bank, causing a chain reaction of crises to occur all over the world, similar to the one that was brought on in 2008 when American institutions failed.
- With the use of a trusted third party like a bank or credit card provider eliminated, the direct movement of money between two parties is made easier by cryptocurrencies. Public keys, private keys, and different types of incentive schemes, like proof of work or proof of stake, are used to protect these decentralized transfers
- Cryptocurrency transfers between two transacting parties are quicker than traditional money transfers since they don’t employ third-party intermediaries. An excellent illustration of such decentralized transfers is flash loans in decentralized finance. These loans can be executed instantly and are used in trading because they are done without supporting collateral.
- Cryptocurrencies are essentially pseudonymous, despite their claims to be an anonymous mode of exchange. They leave a digital footprint that organizations like the Federal Bureau of Investigation (FBI) are able to analyses. This makes it possible for federal or state authorities to monitor the financial transactions of regular persons.
- Cryptocurrencies have become a popular tool with criminals for nefarious activities such as money laundering and illicit purchases. The case of Dread Pirate Roberts, who ran a marketplace to sell drugs on the dark web, is already well known. Cryptocurrencies have also become a favorite of hackers who use them for ransom ware activities.
- The wealth of cryptocurrencies is supposed to be divided among multiple parties on a block chain, making them theoretically decentralized. Ownership is actually very concentrated. For instance, an MIT research discovered that only 11,000 investors held nearly 45% of the rapidly increasing value of Bit coin.
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