Everyone has been talking about Bitcoin lately. Well, more generally, everyone has been talking about cryptocurrency.
This article will address myths, rumors and the general principles of cryptocurrency in a manner that makes cryptocurrency a little less…for the lack of a better word…cryptic.
1) Cryptocurrency is a digital currency that uses cryptography for security, and the currency’s security mechanism makes it extremely difficult to counterfeit.
• This is vastly different from typical currencies (i.e. dollars, euros, yuan, etc.), which people create counterfeit versions of all the time.
2) Cryptocurrency is not issued by a central authority.
• Again, this is vastly different from typical currencies, which are issued by various government agencies (i.e. U.S. Treasury, Bank of England, etc.).
3) Transfers of cryptocurrency have low processing fees.
• This aspect of cryptocurrency is very beneficial for organizations that have numerous wire transfers because banks and financial institutions can charge significant fees for wire transfers.
4) Governments are beginning to regulate crytocurrency transactions.
• As of the date of publishing this article, several U.S. states (i.e. California, Alabama, among others) have proposed legislation that regulates virtual currency businesses, China has banned cryptocurrency trading on exchanges and the EU is considering cryptocurrency regulations.
1) Bitcoin is the only cryptocurrency.
• There are a variety of cryptocurrencies: Bitcoin, Ethereum, Dash, Litecoin, among others.
2) Cryptoocurrency is produced out of thin air.
• This is sort of fiction. Units of cryptocurrency are created when people solve complicated math problems on the computer, and this problem solving process is called “mining”.
3) Transactions using cryptocurrency must be hard to track if there are no physical manifestations of the currencies.
• Cryptocurrencies are actually logged in online ledgers that are currency specific, which make tracking the currencies fairly straightforward (yes, I know this is abstract).
4) Government regulations about cryptocurrency are crystal clear.
• This is honestly not a knock on legislators or regulators. It is incredibly difficult to wrap people’s brains around crytocurrency, its origins and its uses, and we do not know where cryptocurrency will be 5-10 years from now. Those two sticking points make it extremely difficult for legislatures to implement effective and clear regulations on the currency.
Long story short – Cryptocurrency has drastically changed since its inception in 2009 and no one knows what it will evolve into by 2027, but I hope this article has served as a good jumping off point for your understanding of cryptocurrency.
If you have any follow up questions, do not hesitate to reach out to me via email ([email protected]) or call (205-254-21846).
You better bet on Bitcoin (or really just cryptocurrency in general).