What is it?
- Cryptocurrency, also known as crypto, is a type of digital currency that operates through a computer network without the need for a central authority like a government or bank to oversee it.
- It works as a decentralized system, verifying transactions and ensuring that the parties involved have the funds they claim to possess.
Examples of Cryptocurrency
- Bitcoin (BTC)
- It is the first and most well-known cryptocurrency, created in 2009.
- Bitcoin was invented by an unknown person or group of people using the name Satoshi Nakamoto and was released as open-source software in 2009. It is considered the first decentralized cryptocurrency.
- Bitcoin has no single administrator, and the currency can be sent electronically from user to user on the peer-to-peer Bitcoin network without the need for intermediaries.
- Transactions are verified by network nodes through cryptography and recorded in a publicly distributed ledger called a blockchain.
- Ethereum (ETH)
- Ethereum (ETH) is a decentralised, open-source blockchain platform that enables the creation of smart contracts and decentralised applications (dApps).
- It uses its own cryptocurrency, Ether, as a means of payment for transaction fees and services on the Ethereum network.
- It also has a built-in programming language that enables developers to create and deploy their own decentralized applications on the Ethereum network.
- Litecoin (LTC)
- Litecoin (LTC) is a peer-to-peer cryptocurrency and open-source software project.
- It is inspired by and nearly identical to Bitcoin (BTC) but with faster transaction confirmation times and a different hashing algorithm.
- It is designed to process small transactions faster and more efficiently than Bitcoin.
- Ripple (XRP)
- Ripple (XRP) is a digital asset and cryptocurrency that is designed to facilitate fast and inexpensive international money transfers.
- It is built on the Ripple Protocol, a decentralized open-source protocol for facilitating cross-border payments.
- Ripple can be used to transfer any currency, including USD, EUR, and Bitcoin, and it can also be traded on digital currency exchanges.
- Bitcoin Cash (BCH)
- Bitcoin Cash (BCH) is a cryptocurrency that was created as a result of a hard fork from Bitcoin in 2017.
- It has a larger block size limit (8MB) compared to Bitcoin (1MB), allowing for faster and cheaper transactions.
- It is considered by some to be a “purer” version of Bitcoin, as it adheres more closely to the original vision of Bitcoin as a peer-to-peer electronic cash system.
Advantages of Cryptocurrency
- Funds transfer between two parties will be easy without the need of third party like credit/debit cards or banks
- It is a cheaper alternative compared to other online transactions
- Payments are safe and secured and offer an unprecedented level of anonymity
- Modern cryptocurrency systems come with a user “wallet” or account address which is accessible only by a public key and pirate key. The private key is only known to the owner of the wallet
- Fund transfers are completed with minimal processing fees.
Disadvantages of Cryptocurrency
- Cryptocurrency transactions are not entirely anonymous and leave a digital trail.
- Cryptocurrencies have been exploited by criminals for illegal activities like money laundering and illicit purchases.
- Ownership of cryptocurrencies is often concentrated in the hands of a few.
- Mining popular cryptocurrencies requires substantial energy resources, contributing to environmental concerns.
- Cryptocurrencies traded in public markets are known for their price volatility.
Central Bank Digital Currencies (CBDCs)
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