Cryptocurrency is defined as any digital asset designed to operate as a medium of financial exchange whereby user coin ownership documents are maintained in a public database maintained in a distributed form of computerized memory, usually in some sort of online database, which is accessible to all users. The most common instance of a Cryptocurrency is money. The word Cryptocurrency derives from Cryptoscience, the study of secrecy and control. For example, Cryptocurrencies used in trading can be classified under two major subsets: Pre- cryptographic and post- cryptography. In this article we’ll discuss Cryptocurrencies and their various uses.
Pre-cryptocurrency would include systems which utilize pre-set encryption keys. It is called a Symmetric Key System (KFS). For instance, in PayPal there is a “Master Account” that stores public key infrastructure (PKI) keys. This kind of system is based on symmetric encryption with associated digital certificates and signatures.
On the other hand, post-cryptocurrency systems are those that rely on cryptography as an encryption technique. Public key infrastructure (PKI) in this case is replaced by digital certificates instead. This type of system operates through digital certificates, which are also usually digitally signed with fingerprints. These fingerprints usually belong to a group of people or organizations known collectively as the Certificate Authority. These authorities establish a relationship with certificate authorities and use their trust authority to sign digital certificates for the services rendered by its customers.
This Cryptocurrency model has several advantages. Firstly, it is secure since digital signatures can prevent tampering and recording of electronic communications. Secondly, it is fast because transactions are secured by proof of ownership rather than authentication. Thirdly, it is convenient since most of the activities normally done in the economy are managed through Cryptocurrency such as transfer of funds, creation of economic leverage, adoption of new technological platforms, centralization of securities and custody of assets.
In addition, we can see another use of Cryptocurrency in the monetary system. Cryptocurrency can be used as money, since it serves as a universal unit of account that transcends national and regional currency boundaries. This means that a particular currency can be freely adopted by any human country without the need for reciprocity. A particular characteristic of Cryptocurrency is its ability to provide a predictable level of exchange rates across international borders. With this feature, individuals and organizations can exchange their currencies without fear of exchange rates fluctuation.
Now, if we want our model of Cryptocurrency to serve as money itself, then it would indeed be useless without the use of Cryptocurrencies. There are certain characteristics expected in the use of Cryptocurrencies. First, it should have an intrinsic value that is greater than its external value. If this happens, then users may expect that their investment will appreciate in value.
Another characteristic that should be there in the use of Cryptocurrencies is its accessibility to supply. Since Cryptocurrencies are decentralized systems, it is expected that its supply would follow a direct relationship between supply and demand. If there is an increase in the number of users, then the value of the Cryptocurrency would also increase. On the other hand, if the number of users decrease, then the value of Cryptocurrencies would decrease. Thus, it is not uncommon for a certain number of Cryptocurrects to change hands multiple times within a day.
Lastly, we could say that Cryptocurrencies are useful for public purposes. Since they do not follow the traditional use of money, people from all walks of life could benefit from its use. It is free of charge, has no risk of loss and has a very strong potential for abuse. These benefits made it a welcome addition to the financial system of any nation. So, what are you waiting for?