What are cryptocurrencies? Cryptocurrency all you need to know in detail
Historically looking at the currencies and methods used in buying and selling
We find that the exchange is the first commercial process to take place between individuals and residential communities.
To develop later and use the bronze material in the first coins.
Then, these currencies developed and became valued from silver and gold metal, to mature more and become in paper form.
In the modern era, it has become more sophisticated and turned into a digital form to become in the form of credit cards and numbers on applications and digital payment methods.
To get up to date with what happened in the financial world and the currencies become in the form of cryptocurrencies.
In this article, we will look at the emergence of encrypted digital currencies and define them, their importance, strengths, and weaknesses in order to depart from their future prospects.
Cryptocurrency is the origin of cryptocurrency
Looking at the history of the emergence of cryptocurrencies, we find that they are of recent origin, as it has been only 10 years since the first appearance of an encrypted digital currency.
This was done by a software developer with the pseudonym "Satoshi Nakamoto", who revealed the first cryptocurrency system that works with the SHA-256 encryption standard, whose work is based on its proof of work.
The project carried a white paper detailing all the details of the first cryptocurrency called Bitcoin, which was in 2009.
Other cryptocurrencies appear with different working protocols than Bitcoin, such as Litecoin, which was released in October of the year 2011, which works somewhat differently from Bitcoin.
Then hundreds of these encrypted digital currencies appeared that are similar to Bitcoin and its construction and differ with it in the ways of working and its goals. We find Ripple, Ethereum, EOS, Bitcoin Cash and more than 2000 other cryptocurrencies.
Definition of Cryptocurrency
After we went back in time and learned about the origin of cryptocurrencies
We will move on and answer the following question:
What is Cryptocurrency?
Encrypted digital currencies or cryptocurrency, the latter, which is an English term for it, and its name can be described as currencies that do not have a physical existence, but rather exist digitally only with its construction on the principle of encryption.
Because there are digital currencies, but they are not encrypted like digital transactions using regular paper currencies (dollar, euro, pound sterling...).
While encrypted digital currencies are based in their work on the blockchain technology that allows the currency to be encrypted and makes it difficult to hack and copy counterfeit currencies, as it eliminates the presence of a third party in its management, but is based on the sender and receiver only.
There are currently more than 2,000 different cryptocurrencies in principle and project, and Bitcoin is the most famous and most expensive in terms of value.
The importance of cryptocurrency
Encrypted digital currencies are considered an inevitable development, given the historical development of currencies, and since we are in the age of technology and the Internet, the necessity of having a currency commensurate with the era in which we live and providing a method of work that is compatible with the era of speed and digitization.
The importance of encrypted digital currencies lies in the extent to which they save time and money in their work, thanks to the technology behind them, which is the decentralized blockchain technology that allows users to send and receive money without the need for a third party and guarantor, such as what banks and financial institutions used to play.
It is possible to transfer an amount of money using Bitcoin in a standard circumstance and from one country to another without the need to pay additional fees, but with very few fees.
Hence the practical value of cryptocurrencies that provide digital solutions that help with money transfers in a standard circumstance and without the need to move or pay additional fees. Rather, a device connected to the Internet and the address of the Bitcoin wallet is sufficient to make the financial transfer or electronic payment for a service.
Cryptocurrency strengths
Cryptocurrencies have strengths and weaknesses in relation to the strengths, as follows:
Fraud resistance: One of the most important strengths of encrypted digital currencies is their resistance to fraud, as it makes it difficult to copy counterfeit encrypted currencies or defraud transmissions and other weaknesses of paper currencies.
Terrible speed of transfers: A strong point of encrypted digital currencies is also the speed in the conversion process and it takes from 10 seconds to 10 minutes as a maximum, unlike traditional methods that take a time of one to two days and sometimes weeks in the case of transfers outside geographical borders.
Low expenses: A prominent strength is also calculated for encrypted digital currencies, which is the low transfer costs, due to the absence of the intermediary who usually asks for additional expenses to ensure the transfer process, while in encrypted digital currencies, the process takes place between the sender and the receiver only without the need for a third party to manage the process and therefore fees drop to record levels Which mostly to protect the network from attacks.
Protection of cryptocurrency holders: Usually, when using a credit card to purchase a service or commodity, it is required to enter the card numbers and all identification information for the success of the payment process, which makes the recipient obtain all the data, which in many cases is exploited by hackers and hackers to seize the credit card and thus control what It has money for encrypted digital currencies. The matter is completely different, as it is sufficient to send the specified amount without the need to reveal any additional details, thus preserving the identity.
The possibility of global use: Cryptocurrencies do not need any additional procedures for use, but rather a device (mobile phone or computer) connected to the Internet, thus accessing and enjoying its services, which means that 2.2 billion people connected to the Internet can use encrypted digital currencies.
Decentralization: As we told us in the definition of encrypted digital currencies, it depends on decentralized blockchain technology and BThat disavows any central authority managing the currency.
Not being subject to financial exchanges: Since encrypted digital currencies are not bound by the exchange rates, interest and transaction fees to which fiat currencies are subject, they are free from all of what has been mentioned except that they are subject to the law of supply and demand and the extent of their demand and adoption.
Cryptocurrency weaknesses
After identifying the strengths, we learn about the weaknesses of cryptocurrencies, which are as follows:
Expansion: One of the most important obstacles and weaknesses of encrypted digital currencies is the problem of expansion and the ability to process a large amount of data and data for payment operations at one time and the difficulty of competing with companies that have a great deal in this field such as Visa and MasterCard. The difficulty of network expansion.
Cyber-attacks: We know in the strengths that cryptocurrencies are immune to counterfeiting, but are vulnerable to hacker attacks, especially the tools they use from their trading platforms or wallets.
Price volatility: Among the weaknesses of cryptocurrencies, we also find the difficulty of being stable on one price and the fluctuation of prices between one minute to the next, which makes dealing with them somewhat difficult and the value variable.
Laws: Many countries impose strict restrictions on cryptocurrency and see it as just scams and scams to beware of.
Adoption: The lack of official authorities managing some cryptocurrencies such as Bitcoin made it somewhat difficult to be adopted by governments and large companies, which made it a matter of controversy until now.
Future Prospects for Cryptocurrency
Cryptocurrencies are here to stay and that they are a necessary evolutionary product, and as the CEO of Twitter told him, Bitcoin is the currency of the Internet and the global currency that humanity needs.
But it still has a lot to go through and overcome from strict international laws and the problem of adoption and demand by users.
However, it will become the currency of the modern economy if it is used and adopted more.