How are cryptos different than money?
Cryptocurrencies are digital currencies that are encrypted to prevent replication and security threats. All cryptocurrencies rely on a blockchain network that helps in ensuring the safety of the data and amount of currency in circulation.
These networks are decentralized, unlike traditional money, bank notes and coin. The characterizing attribute that gives cryptocurrency an edge over other economic options is that it is non-discriminatory and readily available. It is a tool for a transaction that even the ‘unbankable’ can use.
A medium of exchange and an accepted store of value. The peer to peer network of blockchain gives each currency the value it stores each day. Cryptocurrencies are equally liquid money but virtual in nature.
How are the Transactions Verified and Monitored?
The banks come in handy in international trade, as they back up the claims of an individual on the ability to pay for a deal or the guarantee of funds and identity. Blockchain and Cryptography have both worked for hand in hand to eliminate the need for that.
Bank help comes with bank intervention and several strings attached. The decentralized network helps in doing so without these strings or interest and heavy transaction fee etc.
The perquisites, proof of incomes, taxation etc make traditional banking tedious and undesirable. Cryptocurrency is also free from a lot of paperwork and red taping. All of this decentralization and still cryptocurrency remains safe and secure. This is because of the underlying blockchain technology and the promise of peer to peer verification systems.
Proof of Work is a feature of blockchain systems added to make the payment true, tamper-proof and transparent. It is a contemporary solution to avert the risk of fraud without market intervention or centralization.
Any transaction happening on the network is visible to all. Miners – dedicated workers who work to check the system is smoothly running by the continuous calculation of Proof of work and Proof of stake ensure that all transactions are real and accounted for.
Hashes – the ID of the block (user data) can be used to recheck that the transaction occurred or not on a public ledger. Like so:
What happens if too many currencies come into play?
Tangible fiat currencies do not see the currencies of other countries as a threat. Simply because while currencies can be used interchangeably, they won’t be in matters of trade where only currency x will be required. Also, domestic matters where only the domestic currency is needed.