Find out more about “What is cryptocurrency?” and “What does it do?” in our guide
Before you start reading this 101, we recommend you read our Zeux 101 on blockchain technology - otherwise, read on. We’ve explained blockchain technology and its uses, now it’s time we explain the term cryptocurrency, the digital currency which is underpinned by blockchain. You’ve probably heard about the crypto craze, with people either jumping with joy at the mention of the word, or those who are much more sceptical — whatever the case you’ve heard of someone talk about some form of cryptocurrency.
Its purpose
It’s original true, one goal of cryptocurrency was to decentralize finance and wrestle control away from “fat cat” finance institutions. The other goal was to make a system that was faster, even more reliable and secure than what’s available from these financial institutions. The promise of cryptocurrencies was to produce near real time exchange/transfer, with immutable record of the transaction, validated by the blockchain making it tamper proof.
Cryptocurrencies did not fully come into the limelight until 2008, the year in which bitcoin was founded. The justification behind the founding of bitcoin was to fix a number of perceived flaws and institutional control in financial services. Despite our trusted perception, the finance system incur many errors or delays either man-made or through reliance on old legacy systems and the end result would always impact customers while being charged high fees.
Cryptocurrencies combat such problems bypassing the typical financial ecosystem with the employment of blockchain technology, meaning that the everyday consumer no longer has to entirely rely on banks to facilitate transactions.
Is it the currency of the future?
Despite the use of the word ‘coin’ in many cryptocurrencies, such as Bitcoin and Litecoin, this can be somewhat misleading — these are not in fact coins per se, but entirely digital monies that uses digital cryptography to secure and verify transactions as well as to control the creation of new units of a particular cryptocurrency.
Put quite simply, cryptocurrencies are an alternative form of currency to the US dollar, Euro, etc but each transactions is stored in the blockchain which “prove” the validity of transactions, adding to the shared public ledger preventing essentially double-spending, spending the same amount of money twice. Normally to prevent this, it is done via a trusted third party e.g. bank, but this also meant; that third party would have complete control of your money and your personal information.
Cryptocurrencies’ blockchains are highly secure, but other areas of the cryptocurrency ecosystem are not completely immune to the threat of malicious attacks. In the news you’ll have heard of several online exchanges have been the subject of hacking and theft but as with all new technologies, new procedures and security are added minimizing this risk. The future of cryptocurrencies is still seen as a new form of currency that can exist to preserves value, easily facilitates exchange, is physically boundless and sits outside the influence of central banks and governments.
At Zeux, we encourage everyone to build upon their financial knowledge. Why not read our other 101 guides and financial tips in our publication. Check them out here.
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