Digital currency
Digital currencies, or cryptocurrencies, are electronic tokens created by computer networks to exchange traditional currencies. Paying anything with a digital currency is not the same as paying with a credit card, debit card, PayPal or ApplePay, which accesses all electronically traditional currencies such as the US dollar, British pound and Chinese renminbi.
In digital currency, electronic tokens are exchanged for traditional currencies and special token exchanges through tokens, such as BitPay. These exchanges operate to some extent similar to PayPal but are not affiliated with this company. Like gold, traditional currencies and commodities are valued based on national and international banking standards.
Creating a digital currency
To create cryptocurrencies, a distributed network of computers in a closed, Internet-based community works through a set of complex cryptographic algorithms, and the output of specialized programs is cryptocurrency represented by digital tokens. Tokens are only valid for trades within digital communities, and individuals and organizations can open accounts in specific communities - also called vaults.
Founders of communities limit the number of tokens that can be generated for transactions in the computer community. Crowd-sourcing efforts to fund a community are called initial coin offerings (ICOs).
One of the first - and obviously most popular - cryptocurrencies that has been established with a certain range of production is the bitcoin. Only one person by the pseudonym Satoshi Nakamoto developed the technology in 2008 to create and manage bitcoin and cryptocurrency. In its exchange, Nakamoto limited the number of bitcoins generated by the distributed network of computers to 21 million. This supply limit ensures token demand, which in turn increases the price.
The value of the bitcoin
At the end of August 2017, Bitcoin had an assigned trading price of approximately $ 5,000 for a Bitcoin. That's more than the price of gold, which at the time was about ً 1,300. However, within two weeks of the digital currency's high watermark, the value of the bitcoin fell to about $ 3,000. Anyone who invested real currency in Bitcoin in mid-August and did not exit the market before the price dropped, lost about 40% of the investment.
Due to its status as the most popular digital currency in the world, the bitcoin community has become a standard in its own right, as are the stock exchanges on Wall Street, London and Japan. As a result, as other digital currency markets fall, so does the value of the bitcoin. In the case of the dramatic depreciation of the bitcoin at the end of August 2017, this was because other corrupt currencies lost the support of the Chinese government after a dangerous rate spread in China in 2017.
The Chinese government feared the rise of large and complex pyramid schemes that revolved around cryptocurrency exchanges that had their own bitcoin-like digital tokens. As a result, the government ordered exchanges such as BTCC, OKcoin and Huobi to close by the end of September 2017. The order caused a stir on global cryptocurrency exchanges, and the value of the bitcoin plummeted due to fears.
Now that Bitcoin has shown fluctuating levels that gold standards and traditional currencies do not experience, it is unlikely that Bitcoin will soon become a global currency standard at any time.
Bitcoin Safety
About a dozen cryptocurrency exchanges have been hacked since 2010. Losses are in the millions (dollars). Relatively, however, traditional banking and financial institutions have lost billions of dollars to cybercriminals over the same time frame. Programmers and cryptocurrency communities are working hard to identify and correct vulnerabilities in their blockchain networks. If the bitcoin becomes an acceptable currency for real-world vendors, government central banks could, in fact, elevate their role through state-of-the-art computer algorithms.
On a personal level, anyone who invests in Bitcoin must have access to financial information and adequate internet security before transacting.
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