Understanding Cryptocurrency

A new kind of money called cryptosystems was first introduced in late 2021 when two things happened. First, the value of the U.S. Dollar dropped by almost twenty percent against many other major currencies. People worldwide became concerned that the value of their internationally traded assets might fall and as such, they began to invest in more secure ways. Second, a new class of digital currencies emerged. Cryptocurrency is one such digital asset that works as a medium for exchange between individuals, companies and even governments.

Cryptocurrency is one such asset because it is one way of moving money from one place to another. In fact, through the use of Cryptocurrency, the monetary units are no longer physical but only digital and can thus be transferred virtually anywhere in the world. There are three distinct types of Cryptocurrencies in use today – Digital Cash, Currencies, and Smart Contracts. Digital cash, which is the most popular form, is what people usually think about when they talk about Cryptocurrency. It is created through the process of “mining” where a specific amount of virtual currency is made with the help of computer applications, usually by private individuals, to create a new unit of currency.

The second type of Cryptocurrency that is used in Cryptocurrency transactions is Currencies. Currencies are units of account that are commonly known by the names of their country of origin, but also by the names of the issuing bank. They are traded between buyers and sellers on the basis of a set exchange rate for the particular pair of currencies. On the other hand, smart contract Cryptocurrency, which is often referred to as “blockchain” currencies, are actually self-executing agreement protocols that provide for real-time execution of transactions, in contrast to previous Cryptocurrency models, which relied on centralized servers to process transactions.