What Is Cryptocurrency?

p class=BodyThere is plenty of misunderstanding about the definition of cryptocurrency. Wikipedia’s well-researched entry on the topic defines “cryptocurrency” as follows (with their links included):/pp class=Body[Cryptocurrency is] a a href=https://en.wikipedia.org/wiki/Digital_assetdigital asset/a designed to work as a a href=https://en.wikipedia.org/wiki/Medium_of_exchangemedium of exchange/a that uses a href=https://en.wikipedia.org/wiki/Cryptographycryptography/a to secure its transactions, to control the creation of additional units, and to verify the transfer of assets. Cryptocurrencies are a type of a href=https://en.wikipedia.org/wiki/Digital_currencydigital currencies/a, a href=https://en.wikipedia.org/wiki/Alternative_currencyalternative currencies/a and a href=https://en.wikipedia.org/wiki/Virtual_currencyvirtual currencies/a. Cryptocurrencies use decentralized control as opposed to centralized a href=https://en.wikipedia.org/wiki/Electronic_moneyelectronic money/a and a href=https://en.wikipedia.org/wiki/Central_bankcentral banking/a systems. The decentralized control of each cryptocurrency works through a a href=https://en.wikipedia.org/wiki/Blockchainblockchain/a, which is a public transaction database, functioning as a distributed a href=https://en.wikipedia.org/wiki/Ledgerledger/a. a href=https://en.wikipedia.org/wiki/BitcoinBitcoin/a, created in 2009, was the first a href=https://en.wikipedia.org/wiki/Decentralizationdecentralized/a cryptocurrency. Since then, numerous other cryptocurrencies have been created./ppWhy create or use a cryptocurrency?/ppThe answer is simple: freedom. (Freedom from centralized powers, to be exact.)/ppThey’re used outside existing centralized banking and government structures, and this is why it’s attractive to users. They’re also mostly exchanged over the internet, which adds to the flexibility./ppa href=http://www.apple.comCoin Telegraph/a points out the intriguing characteristic of cryptocurrency:/ppWhile these alternative, decentralized modes of exchange are in the early stages of development, they have the unique potential to challenge existing systems of currency and payments. As of December 2017 total market capitalization of cryptocurrencies is bigger than 600 billion USD and record high daily volume is larger than 500 billion USD.As of January 2018, there were over 1384 and growing digital currencies in existence./ppMany people buy cryptocurrency as they would an investment, with the hopes of profiting from its fluctuation in price. It’s also commonly used as a way to spend money as more and more businesses accept Bitcoin and others for payment./ppstrongspan style=text-decoration:underlineConcerns About Cryptocurrencies and Legality Issues/span/strongspan style=text-decoration:underline/span/ppAlso noted by Coin Telegraph, but in a a href=https://cointelegraph.com/bitcoin-for-beginners/is-bitcoin-legal%23conce... report/a, the world is still trying to wrap its head around the concept of Bitcoin and the security and legal implications of cryptocurrency. It’s also not surprising that governing agencies and central powers are worried and not particularly happy about a “rogue” financial community that they can’t control./ppAs Coin Telegraph observes: this also extends to exchanges and protection of people’s funds. US-based exchanges have to be regulated, but there are plenty of offshore platforms that don’t. (And some onshore platforms have a href=http://www.apple.comblatantly broken the laws of the US/a.) The cryptocurrency history has been filled with instances of exchanges shutting down and running away with people’s funds./ppThe most famous of such cases is the closure of the notorious exchange Mt.Gox. At the beginning of 2014, formerly the most prominent Bitcoin exchange in existence filed for bankruptcy due to technological problems and the apparent theft or loss of 744,000 of its users Bitcoins. That number made up about six percent of 12.4 mln Bitcoins in circulation at the time./ppBitcoin’s ability to be used semi-anonymously is another cause for concern. Even though every single transaction is recorded in the Blockchain, it is very easy for users to stay almost completely anonymous, as those records only contain the public keys and the amount of funds transferred./ppMost of these concerns were voiced after a dark web market Silk Road gained mainstream-media attention, as Bitcoins were the only form of payment accepted there. The market was since shut down by the FBI, but the authorities are still worried about Bitcoin’s appeal among the traders of illegal goods and services. Moreover, it is feared that Bitcoin’s semi-anonymity and decentralized nature can be exploited in money laundering and tax evasion schemes./ppIn 2013, Bitcoin was a href=https://www.fincen.gov/news/testimony/statement-jennifer-shasky-calvery-... as a convertible decentralized virtual currency by the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN). They have also issued a a href=https://www.fincen.gov/sites/default/files/shared/FIN-2013-G001.pdfguida..., in which they stated that those who obtain units of virtual currency and use it to purchase goods are not considered money transmitters and are operating within the law./ppSo basically it comes down to this: buying well-natured goods and services with Bitcoins is completely legal. The cryptocurrency is accepted as a form of payment on several major and minor online marketplaces and service providers, including a href=https://www.overstock.com/Overstock/a, a href=https://shopify.com/Shopify/a and a href=https://www.okcupid.com/OKCupid/a. Moreover, there are shops and restaurants all over the US where you can pay with Bitcoins./ppstrongInvesting/strong/ppAccording to the same guidance, investing in Bitcoin is also within the legal territory.  Many regulated US-based exchanges have to comply with the Anti-Money Laundering and Know Your Customer policies. Because of that, those who wish to trade and invest in Bitcoin have to verify their ID and connect an existing bank account./ppAlthough, the US Securities and Exchange Commission (SEC) has a href=https://www.investor.gov/additional-resources/news-alerts/alerts-bulleti... potential investors that both fraudsters and promoters of high-risk investment schemes may target Bitcoin users./ppOf course, readers might feel a bit overwhelmed trying to process the concept of cryptocurrency and all that it implies. We recommend that interested parties seek out guidance from your attorney and financial advisor prior to becoming financially engaged, or invested, in cryptocurrencies./p