Cryptocurrencies 101: Introduction and Properties
There’s no denying that cryptocurrencies are a major phenomenon in the world of finance today. Though it has just started booming a couple of years ago, one can say that it’s been quite a while in the game, making a name for itself.
Cryptocurrencies have opened new doors for market enthusiasts and finance geeks to study. It has also brought new innovations to the way the world of finance moves.
The problem is not all people are really familiar with how it works, and why its name is so hot nowadays. You can’t deny, though, that almost everyone’s now aware of it. Banks and investments firms have done various research on this topic.
What are Cryptocurrencies?
There are a lot of noise surrounding the name cryptocurrency, but there’s one simple way to think of it. You can consider it as limited entries in a database. And no one can change such entries without meeting very specific conditions. That may sound mundane to you, but that’s exactly how currencies work.
A cryptocurrency like Bitcoin is composed of a network of peers. And each of these peers contain a record of the complete history of all the transactions and consequently the balance of every account. A transaction is a file that stores specific kind of information. And each transaction is signed by a private key.
In their most basic form, cryptocurrencies are entries about a token in a decentralized consensus database. The process of keeping the consensus is based on cryptography, meaning it’s math that secures it and not people or companies.
Cryptocurrencies: Transactional Properties
Here are some of the transactional properties of cryptocurrencies:
- You can’t reverse them. After they get confirmed, you can never reverse the transaction. In fact, no one can reverse them ever. That means after you send some money, that’s it. There’s no turning back. You can never undo that. That means if you send your money to a scammer, no one can help you. Therefore, it’s important you be careful when sending money via cryptocurrencies.
- No real-world identities. One can say that the transactions and accounts in here are pseudonymous in a manner that Bitcoin Price are received on so-called addresses. These addresses are randomly seeming chains of around 30 characters. It is quite impossible to connect such addresses to real-world people.
- Speedy and worldwide. Cryptocurrency transactions are done all over the world at any given time. The transactions are also confirmed in just a couple of minutes. And because they take place on a global network, your location will be inconsequential.
- They are secure. The funds in cryptocurrencies are locked in a public key cryptography system. That means only the owner of the private key can send cryptocurrency. This scheme is quite impossible to break, thanks to extremely strong cryptography as well as the magic huge numbers.
- You don’t have to deal with a gatekeeper. Cryptocurrencies are permission-less and you just have to download a software that everybody can use for free. Install it, and you’re good to go receiving and sending cryptocurrencies.