Introduction to Cryptocurrency
Cryptocurrencies can be explained as the type and subdivision of digital currencies that runs under both, the centralized foundation or the distributed network. The centralized scheme is the type of digital currency that the foundation issues with the objective of buying and selling of goods. In addition to that, it has the purpose to ensure that digital coins can be replaced to other authorized currency. Linder Dollar is one of the best examples of centralized digital currency that is issued by Linden Lab with the intention to get in use with the online virtual world. There are various features of digitalized currency that are similar to authorized currency. Likewise, the traditional money system, it also serves among the masses as a source of trust. In addition, while using this technology, members can assure transactions without a need for a central clearing authority.
The motive of a decentralized currency scheme is to keep a distance from the central foundations to the great extent and to develop a network that is based on the transaction partners. It is evident that strong understanding and observation among the transaction partners can help them to enhance their level of trust on the basis of the attitudes. In case, the observation and understanding are impossible among the transaction partners, then dependable transactions can be processed on the basis of other machines as well. Decentralized currency scheme is one of the solutions that are available in cryptocurrencies that are founded on the cryptography.
According to experts, cryptocurrency is one of those digital tokens that is created with the help of cryptographic algorithms. This digital token is later moved among cyberspace while utilizing different protocols that also includes peer-to-peer networking. It is very much clear that the worth of these cryptocurrencies can be determined from the level of demand and supply. In addition to that, there is a crucial component of its appeal that lies in the decentralization of the whole mechanism into which it exists. The widespread of these digital currencies has transformed the entire course of the transaction and has extended the support for innovation and modernization. However, there are also concerns of few regulators such as the Financial Technology Community who debates on the extensive use of cryptocurrencies among the masses.
Advantage of CryptoCurrency
Advancement in the Technology
There are multiple advantages attached with the use of cryptocurrencies that primarily includes the innovative characteristics pertaining to security, comfortable to use through gadgets such as mobiles, comparatively cheaper production and transmission cost through blockchain transmission procedure less long-standing inflation risk. There are many Global Financial corporations that have started to introduce their own cryptocurrencies such as the Citibank. The above-mentioned advantages of cryptocurrencies have now persuaded many Global Financial Corporations to introduce their digital currency.
Disadvantages of CryptoCurrency
Vagueness in identifying the Value
In contrast to the benefits of the cryptocurrency, there are also some problems or drawbacks associated with the adaption of crypto currency that is highlighted by the analysts. Adaption of cryptocurrency has led to the early track record of the liquidity, together with the high level of instability, possible vague uses. Successful execution of cryptocurrency has also given rise to several confusions which include questions as to whether they are digital or virtual currencies. Similarly, confusions prevail in relation to the determination of its value.
Growth of CryptoCurrency
The proliferation of virtual currencies is been observed among various countries of the world. The examples of this proliferation of currencies incorporate Facebook Credits, Amazon Coins and Microsoft Points. Cryptocurrencies are very much different in features from bitcoins as it is originally issued by the institution and deviated from claiming to any real asset. In case, the institution likes Facebook moves toward launching a cryptocurrency in order to compete with the traditional currencies, it is likely to happen that currency is adopted rapidly by the members of the network. Virtual currencies are commonly controlled by the centralized authority that may be the corporation which has issued it; hence the purpose is exclusively to promote online purchases. It should be noted that cryptocurrencies are relatively the closest type of physical currencies. The reason for the fact is their usage as a form of exchange for tangible goods. Money supply in most of the developed countries of the world is seen through a digital form that can be considered in the cryptocurrency form.
Cryptocurrency, A Valuable Asset
The cryptocurrency is seen as a virtual currency by US Inland Revenues Service, and this is the reason that cryptocurrency should be viewed as an asset. Under the US financial law, the huge properties like cryptocurrencies are subjected to capital asset taxes. Many of the other jurisdictions that have adopted the cryptocurrencies including Canada, Sweden, Norway have also considered this digital currency as a highly valuable asset. Germany is one of those countries that recognized and adopted the cryptocurrency very early, also accepts the fact that cryptocurrencies can be used as a unit of account for the purpose of trading and taxation within the state. It should be noted here that no proper consensus has been formed till yet that can describe the cryptocurrency in the best way as a currency or as an asset. However, it is essential to deal with these issues within the limitations of each jurisdiction together with their capabilities in order to effectively execute it.
It is important to find that whether digital currencies require regulations and oversights. They also claimed many of the cryptocurrencies that are issued and regulated by the multinational institutions and companies are basically the huge subsidies for the purchasers so that they can participate in the set-up or the platform like Kindle and Amazon coins. The type of system if properly executed will be beneficial as well as low cost for the companies because they currencies issued have to be spent on the products like Amazon or Kindle rather than on any other service or good.