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What is electronic money?

Since the 1980s, the talk of establishing a form of cryptocurrency has enthralled the world.

In 2009, the first decentralized cryptocurrency, Bitcoin, was created.

Cryptocurrency is a form of digital currency

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Cryptocurrency is a form of digital currency

What is electronic money?

Cryptocurrency is officially defined by Dr. Jan Lansky – a professor versed in computer science, mathematics and economics – as a system that meets six conditions:

  • The system does not require a central authority
  • The system keeps an overview of cryptocurrency units and their ownership
  • The system determines if it is possible to create new crypto-currency units
  • Ownership of crypto-currency units can be exclusively demonstrated by cryptography
  • The system allows transactions in which ownership of cryptographic units is changed
  • If two different instructions for changing ownership of the same cryptographic units are entered simultaneously, the system executes at most one of them.

Known as a digital currency that is used to act as a virtual medium of exchange, cryptocurrencies are independent of any central authority – including governments or banks.

Cryptocurrency exchanges are circulated through the blockchain, which is just another word for the growing list of cryptographically secured records.

Cryptography is simply the study of secure communication techniques.

Read our crypto live blog for the latest news and updates…

What is Bitcoin?

Bitcoin is a virtual currency created in January 2009 by an unknown computer using the alias Satoshi Nakamoto.

Unlike physical currencies like dollars, pounds or euros – which come in the form of banknotes and coins – Bitcoin is not printed or minted.

Instead, the Bitcoin token is a digital-only form of payment and is generated with computer code.

On August 18, 2008, the domain ‘bitcoin.org‘ Registered.

Months later, an article written by the mysterious Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System was published and linked to a cryptographic mailing list.

While Bitcoin remains the most widely used form of decentralized currency, other cryptocurrencies still exist, including LitecoinNamecoin, Peercoin, Dogecoin, Gridcoin, Primecoin, Ripple, Nxt, Auroracoin, Dash, NEO, MazaCoin, MoneroTitcoin, Verge, Stellar, Vertcoin, Ethereum, Ethereum ClassicNano, TetherFiro, Zcash, Bitcoin Cash, EOS.IO, Cardano, TRON, AmbaCoin, Avalanche, Shiba Inu, DeSo, SafeMoon and Internet Computer.

As of February 28, 2022, Bitcoin is currently worth $41,656.00.

Bitcoin is a form of electronic money

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Bitcoin is a form of electronic moneyCredit: Reuters

How are cryptocurrency transactions recorded?

In a blockchain, a series of blocks containing timestamps and transaction data exists.

It is essentially a virtual bank ledger, without the official backing of an actual bank.

Cryptocurrency wallets exist for the purpose of sending or receiving digital currency.

Cryptocurrency networks exist through computers, called a node.

A node works to support the relevant network through transactions, validations, or copies of the blockchain.

Timestamps are basically used to prove the validity of cryptocurrency transactions in the blockchain ledger.

There are different methods of timestamping, including proof of work and proof of stake.

The proof-of-work method shows that one party proves to others that a certain amount of computational effort was made on each exchange.

The proof-of-stake method, on the other hand, selects validators that correspond to the blockchain’s holdings in a relevant cryptocurrency.

The confirmation of transactions in the cryptocurrency network is called mining.

5 Risks When Investing in Cryptocurrencies

BELOW, we round up the five risks of investing in cryptocurrencies.

  • Consumer protection: Some crypto-based high-return promotional investments may not be subject to regulation beyond anti-money laundering requirements.
  • Price volatility: Significant price volatility in cryptocurrencies, combined with the inherent difficulties in valuing cryptocurrencies reliably, puts consumers at high risk of loss.
  • Product complexity: The complexity of some crypto-related products and services can make it difficult for consumers to understand the risk. There is no guarantee that cryptocurrency can be converted back to cash. Converting a cryptocurrency back into cash depends on the demand and supply available in the market.
  • Fees and charges: Consumers should consider the impact of fees and charges on their investment, which may be more than the impact of fees and charges on managed investment products.
  • Marketing materials: Companies can overstate product returns or minimize the risk involved.

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Caroline Bleakley

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