A cryptocurrency is a form of digital money and bitcoin is the most famous and valuable. While a traditional currency is recognised by the law of the country that issues it - this is known as legal tender - a cryptocurrency isn't allied to, controlled or certified by any government.
Cryptocurrencies are actually released as open source software that anyone with an internet connection can ‘mine’. Mining is where this software offers mathematical problems that people (miners) can attempt to solve online. If they do so successfully, they are rewarded with unit amounts of cryptocurrency.
Do I need to be a software geek to get into cryptocurrency?
If you are then great, but if not that's ok too. If you don’t want to or can't mine, you can still get cryptocurrency by buying it with regular currency (FIAT) on a cryptocurrency exchange or with us via our Bitcoin OTC Trading Desk here at CCOTC.
Blockchain technology processes the exchange transactions from person A to person B directly and securely, without having to go through a bank or government.
Furthermore, every transaction is fully transparent and securely stored. This is achieved thanks to a process called cryptography, which turns transaction information into highly secure code.
So why is cryptocurrency important?
Not everyone thinks it is and cryptocurrency has its hard core fans and its doubters and haters - but it can't be ignoed any longer....
Cryptocurrencies are interesting for several reasons:
They're decentralised so governments can’t control them or interfere or "print" more...
There's a high degree of anonymity, meaning you can make transactions without necessarily using your name or via a bank. NB Cryptocurrency blockchains vary in degrees of anonymity.
Security due to the way the transaction info is stored on a blockchain, using cryptography.
Low transaction fees unlike most traditional banking institutions.
You don’t need to be approved by a bank to use, buy or trade cryptocurrencies.
They are borderless and anyone in the world can buy sell or trade cryptocurrencies - except some Govt's try to ban.
The Doubters & Haters State:
Because cryptocurrencies provide anonymity, they're used for criminal transactions.
Risky value proposition with no third party guaranteeing the value as it's determined by the community.
You can lose your digital currency to hackers.
They are volatile, which leaves investors open to potentially huge gains and losses.
What are the most common cryptocurrencies?
Bitcoin was the first cryptocurrency to hit the market in 2009 - someone, or perhaps some people, under the pseudonym Satoshi Nakamoto, invented it. They were also responsible for implementing the first Blockchain database.
Fast-forward almost a decade and there are now over 1000 cryptocurrencies available. Ethereum, Monero, Litecoin and Ripple are some examples, but the list is long and is only going to get longer!
How cryptocurrency is changing the world:
Money may make the world go around – but cryptocurrency is turning it on its head.
In this lesson, we take a look at how digital currencies are quite literally changing the world.
As you read this, ordinary people across the planet are using them to tackle real-life financial and economic challenges. Some countries are even proposing replacing their traditional national currencies with cryptocurrencies.
The case studies below demonstrate the transformative power of cryptocurrencies – both today and in the future.
Is cryptocurrency regulated?
Good question. Unfortunately, it’s not an easy one to answer.
The regulatory status of cryptocurrency varies between countries and it’s important to distinguish between the areas of legal status and official recognition. While the majority of countries don’t currently outlaw the use of cryptocurrency, its official recognition as either ‘money’ or a ‘commodity’ depends on the jurisdiction.
As you read this, many countries and territories, such as the European Union, are in the process of reviewing their positions on cryptocurrency.
Some cryptocurrencies, such as Bitcoin, are still associated with illegal activities - mainly due to historic high-profile cases, such as the famous ‘Silk Road’ trial. Much has changed since then, however, and many countries are trying to take a more balanced and rational approach that recognises both the vulnerabilities and potential of cryptocurrency.
Why is cryptocurrency proving difficult to regulate?
A core feature of cryptocurrencies is that they operate on a decentralised platform, while traditional financial institutions and services are centralised and adhere to a defined set of rules and regulations. Regulatory bodies in the UK, such as the Financial Conduct Authority (FCA), enforce these clearly defined policies that all banks, financial services firms and advisers must follow.
Given cryptocurrency’s relatively recent surge in popularity, the FCA hasn’t quite caught up and is yet to consolidate their position on how to regulate them.
Cryptocurrency regulations in action:
Parts of the world are approaching regulations differently – with varying degrees of success.
Should cryptocurrency be regulated?
That’s the billion dollar question – there are supporters of both. The majority of the community would say no, governments and banks would say yes… Regulation goes against the idea of a currency free from interference, but let’s see, only time will tell.