What Is Cryptocurrency?
A cryptocurrency is a digital or virtual currency that is designed to be use as a means of exchange. It uses strong cryptography for security to secure and verify transactions’ and also control the creation of new units of a particular cryptocurrency. A cryptocurrency is difficult to counterfeit because of its security features. Cryptocurrencies are not issued by central banks and their values does not depend on any bank policies. It is organic in nature and has no central authority nor government interference or manipulations.
A cryptocurrency is a fully decentralized digital currency;The decentralized control of each cryptocurrency works through distributed ledger technology typically known as a blockchain that serves as a public financial transactions’ database.
There have been many attempts at creating a digital currency during the 90s tech boom, with systems like Flooz,Beenz and DigiCash emerging on the market but failed. There were many reasons for their failures, such as fraud, financial problems and even frictions between companies’ employees and their bosses.
Notably, all of those systems utilized a Trusted Third Party approach, meaning that the companies behind them verified and facilitated the transactions’. Due to the failures of these companies, the creation of a digital cash system was seen as a lost cause for a long while.
Then, in early 2009, Bitcoin became the first decentralized cryptocurrency to capture the public imaginations. Bitcoin was created by an anonymous person or group called Satoshi Nakamoto. Nakamoto published the invention on October 31, 2008, to a cryptography mailing list called Metzdowd.com. The research paper was called “Bitcoin: A Peer-to-Peer Electronic Cash System.” It was implemented in its first client and released to the open source community in January 2009.
Bitcoin’s success has spawned a number of competing cryptocurrencies called Altcoins such as Litecoin, Ethereum, Ripple and many more. As of May 2018, there were over 1,800 cryptocurrencies existing within a cryptocurrency system, the safety, integrity and balance of ledgers is maintained by a community of mutually distrustful parties referred to as miners; who uses their computers to help validate and timestamp transactions’, adding them to the ledger in accordance with a particular timestamping schemes.
BENEFITS OF CRYPTOCURRENCIES.
cryptocurrency prices are purely based on supply and demand. The great thing about cryptocurrencies is that you can send and receive money anywhere in the world at any given time. You don’t have to worry about bank hours, formal permission or any other limitations. You can make and complete payments in bitcoin without anyone’s personal information being tied to the transactions’, therefore it also protects against identity theft. The fees involved are usually also low, compared to legacy systems like Western Union. Bitcoin payments are irreversible and secure, meaning that merchants don’t have to worry about the cost of fraud.
Cryptocurrencies make it easier to transfer funds between two parties in a transaction; these transfers are
facilitated through the use of public and private keys for security purposes. These fund transfers are done with minimal processing fees, allowing users to avoid the steep fees charged by most banks and financial institutions for wire transfers.
Central to the appeal and function of Bitcoin is the blockchain technology it uses to store an online ledger of all the transactions’ that have ever been conducted using bitcoins, providing a data structure for this ledger that is exposed to a limited threat from hackers and can be copied across all computers running Bitcoin software. Every new block generated must be verified by the ledgers of each user on the market, making it almost impossible to forge transaction histories. Many experts see this blockchain as having important uses in technologies, such as online voting and crowdfunding, and major financial institutions such as JP Morgan Chase see potential in cryptocurrencies to lower transaction costs by making payment processing more efficient.
Cryptocurrencies are not immune to the threat of hacking. In Bitcoin’s short history, the company has been subject to over 40 thefts, including a few that exceeded $1 million in value. Still, many observers look at cryptocurrencies as hope that a currency can exist that preserves value, facilitates exchange, is more transportable than hard metals, and is outside the influence of central banks and governments.
Legality Of Cryptocurrency
As cryptocurrencies are becoming more and more mainstream, law enforcement agencies, tax authorities and legal regulators worldwide are trying to understand the very concept of crypto coins and where exactly do they fit in existing regulations and legal frameworks.
With the introduction of Bitcoin, the first ever cryptocurrency, a completely new paradigm was created. Decentralized, self-sustained digital currencies that don’t exist in any physical shape or form and are not controlled by any singular entity were always set to cause an uproar among the regulators.
A lot of concerns have been raised regarding cryptocurrencies’ decentralized nature and their ability to be used almost completely anonymously. The authorities all over the world are worried about the cryptocurrencies’ appeal to the traders of illegal goods and services. Moreover, they are worried about their use in money laundering and tax evasion schemes.
As of November 2017, Bitcoin and other digital currencies are outlawed only in Bangladesh, Bolivia, Ecuador, Kyrgyzstan and Vietnam, with China ans Russia being on the verge of banning them as well. Other jurisdictions, however, do not make the usage of cryptocurrencies illegal as yet, but the laws and regulations can vary drastically depending on the country. The legal status of cryptocurrencies varies substantially from country to country and is still undefined or changing in many of them. While some countries have explicitly allowed their use and trades others have banned or restricted it.
The legality of Bitcoin depends on who you are, where you are in the world, and what you’re doing with it.