Introduction to Cryptocurrency
What is cryptocurrency?
Cryptocurrency is a type of digital currency created through code that operates independently of traditional banks and government systems. It uses cryptographic techniques to ensure the security of transactions and regulate the creation of other units.
Features
- Decentralisation: Cryptocurrencies are not excessively constrained or influenced by governments, and their economy is monitored through peer-to-peer internet protocols.
- Digital Form: Cryptocurrencies consist solely of intangible data bytes stored on the internet.
- Blockchain Technology: Most cryptocurrencies are based on blockchain technology, a continuous digital chain of blocks that contains information to record and verify transactions.
- Scarcity: The production process of cryptocurrencies is slow and yields limited amounts, endowing them with scarcity attributes similar to those of commodities such as gold and other precious metals.
Types of Cryptocurrency
- Bitcoin: The original and, to date, the most famous cryptocurrency, created by Satoshi Nakamoto and launched in January 2009.
- Litecoin: A "lite" version of Bitcoin, primarily aimed at making cryptocurrency transactions quicker and simpler.
- Ethereum: With a release limit of 18 million coins per year, Ethereum operates slightly differently than Bitcoin.
Uses of Cryptocurrency
- Payment Tool: Cryptocurrencies can be used for online transactions, providing a new mode of payment.
- Investment Tool: Investors can trade on the price movements of cryptocurrencies through Contracts for Difference (CFDs).
Regulation of Cryptocurrency
- US Regulation: The United States adopts a co-regulatory model for cryptocurrency, with different businesses possibly regulated by different enforcement agencies such as the SEC and CFTC.
- Risks: The development of cryptocurrency is still immature, with significant price volatility and issues related to security breaches and scams.
