CRYPTOCURRENCY
Background
Dictionary
cryp·to·cur·ren·cy
ˈkriptōˌkərənsē/
noun
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a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.
"decentralized cryptocurrencies such as bitcoin now provide an outlet for personal wealth that is beyond restriction and confiscation"
What is it? Essentially, a cryptocurrency is a digital currency that operates outside of any government control. That means these currencies cannot be manipulated by central banks like our own Federal Reserve or other central banks around the world.
Transactional properties of cryptocurrency:
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Irreversible: After confirmation, a transaction can‘t be reversed. By nobody. Nobody. If you send money, you send it. It’s gone. If you sent your funds to a scammer or if a hacker stole them from your computer. There is no safety net.
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Pseudonymous: Neither transactions nor accounts are connected to real world identities. You receive Bitcoin on addresses, which are random chains of around 30 characters. While it is usually possible to analyze the transaction flow, it is not necessarily possible to connect the real world identity of users with those addresses.
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Fast and global: Transaction are propagated nearly instantly in the network and are confirmed in a couple of minutes. Since they happen in a global network of computers they are completely indifferent of your physical location. It doesn‘t matter if I send Bitcoin to my neighbor or to someone on the other side of the world.
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Secure: Cryptocurrency funds are locked in a public key cryptography system. Only the owner of the private key can send cryptocurrency. Strong cryptography and the magic of big numbers makes it impossible to break this scheme. A Bitcoin address is more secure than Fort Knox.
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Permissionless: You don‘t have to ask anybody to use cryptocurrency. It‘s just software that everybody can download for free. After you installed it, you can receive and send Bitcoin or other cryptocurrencies. No one can prevent you. There is no gatekeeper.
Monetary properties of cryptocurrency:
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Controlled supply: Most cryptocurrencies limit the supply of the tokens. In Bitcoin, the supply decreases in time and will reach its final number in the year 2140. All cryptocurrencies control the supply of the token by a schedule written in the code. This means the monetary supply of a cryptocurrency in every given moment in the future can roughly be calculated today. There is no surprise.
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No debt but bearer: The Fiat-money on your bank account is created by debt, and the numbers, you see on your ledger represent nothing but debts. It‘s a system of IOU. Cryptocurrencies don‘t represent debts. They just represent themselves. They are money, not debt.
To understand the revolutionary impact of cryptocurrencies you need to consider both properties. Bitcoin as a permissionless, irreversible and pseudonymous means of payment is an attack on the control of banks and governments over the monetary transactions of their citizens. You can‘t hinder someone to use Bitcoin, you can‘t prohibit someone to accept a payment, you can‘t undo a transaction.
As money with a limited, controlled supply that is not changeable by a government, a bank or any other central institution, cryptocurrencies attack the scope of the monetary policy. They take away the control central banks take on inflation or deflation by manipulating the monetary supply.
Further reading:
The Seven Network Effects of Bitcoin
The Great Bitcoin Bull Market Of 2017
Blockchain explained... in under 100 words
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Educate yourself! If you don't know what you are doing then find yourself a crypto advisor!
Bitcoin and the economic singularity | Mark Jeffrey | TEDxHighPoint
What is cryptocurrency: Simplified guide to cryptocurrencies
Info from Blockgeeks, Wikipedia
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