CryptocurrencyLinks to an external site. is defined as the money of the future or a 21st-century unicorn as some may joke. It has become a global phenomenon while being misunderstood by majority of financial institutions, governments and companies which are still working according to old standards. However, many of people working there have heard about virtual currencies such as Bitcoin which confused the society with its innovative approach to handling money flow in a form of digital cash.
The most popular cryptocurrencies of today
The most popular cryptocurrencies nowadays are: Bitcoin (market cap $11, 382, 240, 050), Ethereum (market cap $904,848,975), Ripple (market cap $290,446,848), Litecoin (market cap $184,904,214), Monero (market cap $83,466,495), Ethereum Classic (market cap $80, 817, 441), Dash (market cap $66, 519, 213), Augur (market cap $52, 038, 360), NEM (market cap $37, 322, 550), Waves (market cap $35, 727, 500).
Is the first such currency which serves as a digital gold standard in the whole industry. Its price has increased from 0 to more than $650, while their transaction volume reached more than 200 thousand daily transactions.
While Bitcoin is referred to as a digital gold, this cryptocurrency is referred to as digital silver. It has an updated algorithm, is even faster and has a larger amount of token than the Bitcoin. However, it is still called „a smaller brother of of bitcoin”.
Is very flexible family of cryptocurrencies as it validates a set of accounts, balances and states as well being able to process complex programs and contracts.
This cryptocurrency raised a lot of awareness when its popularity peaked in Summer 2016. It happened for the reason of darknetmarkets deciding not to accept it as a currency. The consequences were its price increase and a decrease of its actual usage.
Has a bigger tendency to process IOUs than to be a cryptocurrency, it doesn’t serve as a medium to store and exchange value while having a XRP as a store of value. It is more like a token to protect the network about spam. However, such financial institutions as banks can use them and are using today as well on a daily basis.
Cryptocurrencies’ working mechanism
Professional people refer cryptocurrencies as some sort of limited entries in a database no one can change without fulfilling specific conditions. In addition, it is a definition of any currency as well. This is true due to the structure of a cryptocurrency. For example Bitcoin consists of a network of peers each of them having a record of the history of all transactions and the balance of every account. A transaction can be defined as a simple file which states that someone is transferring a certain amount of bitcoins to another person and seals the deal by signing the file with his or her private key. After signing the file, the transaction made is broadcasted in the network and sent from one peer to another.
The whole mechanism looks like: someone requests a transaction – it is then broadcasted to P2P network consisting of computers (nodes) – then validation comes into play as the user’s status must be validated by using known algorithms – after the verification the transaction is combined with other transactions in order to create a new block of data – it is then added to the existing block chain – and the transaction is complete.
So, basically cryptocurrencies working mechanism or better to say a technology can be called a p2p-technology where cryptocurrency itself becomes a medium of exchange which is created and stored electronically in the block chain by using some encryption techniques for controlling the creation of monetary units and verifying the transfer of funds. In general, cryptocurrency is digital money which was created from code which economy is monitored by a peer-to-peer internet protocol which has an encoded or encrypted string of data.
The increasing popularity of cryptocurrencies
Nowadays cryptocurrencies are increasing in popularity mostly due to their revolutionary properties which make them similar to digital gold, while being also secure from political influence. They are pretty fast and comfortable means of monetary transactions. Cryptocurrencies can also serve as means of payment for black markets as they are anonymous. They are creating a dynamic market of investors as they daily trade volume exceeds that of major European stock exchanges. Every day more new cryptocurrencies are emerging and the old ones disappearing after a few months survival marathon at the cryptocurrency market.
Cryptocurrencies as an investment object
Can be a good investment object because of such transactional properties as: being irreversible (after a confirmation, the transaction being made can’t be reversed), pseudonymous (transactions as well as accounts are not connected to real-world identities), fast and global (transactions are confirmed in a couple of minutes), secure (as they are locked in a public key cryptography system), permissionless (all is needed for their usage is a software which can be downloaded). Some say that later they will overtake the Western Union as a more preferable remittance tool.