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CRYPTOCURRENCIES 101



Explained:

"Crypto" refers to the various encryption algorithms and cryptographic techniques that safeguard these entries, such as elliptical curve encryption, public-private key pairs, and hashing functions.

  • A cryptocurrency is a form of digital asset based on a network that is distributed across a large number of computers. This decentralized structure allows them to exist outside the control of governments and central authorities.


  • Some experts believe blockchain and related technologies will disrupt many industries, including finance and law


· The advantages of cryptocurrencies include cheaper and faster money transfers and decentralized systems that do not collapse at a single point of failure.


  • The disadvantages of cryptocurrencies include their price volatility, high energy consumption for mining activities, and use in criminal activities.

Cryptocurrencies represent a new, decentralized paradigm for money. In this system, centralized intermediaries, such as banks and monetary institutions, are not necessary to enforce trust and police transactions between two parties. Thus, a system with cryptocurrencies eliminates the possibility of a single point of failure, such as a large bank, setting off a cascade of crises around the world


Cryptocurrencies were introduced with the intent to revolutionize financial infrastructure. As with every revolution, however, there are tradeoffs involved. At the current stage of development for cryptocurrencies, there are many differences between the theoretical ideal of a decentralized system with cryptocurrencies and its practical implementation.


Cryptocurrency does not exist in physical form (like paper money) and is typically not issued by a central authority. Cryptocurrencies typically use decentralized control as opposed to a central bank digital currency (CBDC). When a cryptocurrency is minted, or created prior to issuance, or issued by a single issuer, it is generally considered centralized. When implemented with decentralized control, each cryptocurrency works through distributed ledger technology, typically a blockchain, that serves as a public financial transaction database.Traditional asset classes like currencies, commodities, and stocks, as well as macroeconomic factors, have modest exposures to cryptocurrency returns.


Often, when you hear about cryptocurrency types, you hear the coin's name. However, coin names differ from coin types. Here are some of the types you'll find with some of the names of tokens in that category:

  • Utility: XRP and ETH are two examples of utility tokens. They serve specific functions on their respective blockchains.

  • Transactional: Tokens designed to be used as a payment method. Bitcoin is the most well-known of these.

  • Governance: These tokens represent voting or other rights on a blockchain, such as Uniswap.

  • Platform: These tokens support applications built to use a blockchain, such as Solana.

  • Security tokens: Tokens representing ownership of an asset, such as a stock that has been tokenized (value transferred to the blockchain). MS Token is an example of a securitized token.

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