The Nature of Cryptocurrencies

Cryptocurrency, also known as digital currency and virtual currency, acts as a medium of exchange to a certain extent. It runs on blockchain technology and uses cryptography to verify and secure transactions.
Essentially, a cryptocurrency is a limited entry in a database that no one can change unless specific requirements are met.
At present, many people’s attitudes towards cryptocurrencies are at two extremes. Some people think that cryptocurrencies are pregnant with countless new opportunities, and they are a good channel that may help them achieve financial freedom. Others think that cryptocurrencies are just bubbles, and ultimately the purpose is to make money.

There are two sides to everything, we can neither blindly pursue cryptocurrencies, nor bluntly deny them completely.

The History of Cryptocurrencies:

In fact, as early as the 1990s when the technology boom broke out, many people tried to create digital currency. At that time, Flooz, Beenz and other systems appeared on the market. Among them, Flooz tried to create a currency unique to Internet merchants, while Beenz was an online currency, and developers allowed users to obtain Beenz by browsing the web, shopping online, etc. However, in the end, these systems failed due to a variety of factors, including fraud, financial problems, and friction between company owners and employees.

It’s worth noting that these systems utilize trusted third parties to keep them running, i.e. the companies behind these systems are responsible for validating and facilitating transactions. And because these companies ultimately failed, building a digital cash system was seen as a doomed business for a long time.

By 2009, an anonymous programmer (and possibly a bunch of them) launched Bitcoin under the name “Satoshi Nakamoto” and defined it as a “peer-to-peer electronic cash system”. Bitcoin is decentralized, which means that there are no servers and no central control agency in the transaction process. Since the introduction of Bitcoin, the concept of “cryptocurrency” has gradually become widely known.

The Main Advantages of Cryptocurrencies:

  1. Easy to obtain. Investors all over the world can easily acquire cryptocurrencies if they want to. You can find many projects looking to raise funds through cryptocurrencies, and almost anyone who can transfer money online can participate in these projects;
  2. Payment and settlement are very convenient. To pay with cryptocurrency, you don’t have to bind a debit card, credit card, etc., or enter personal information, but only need a wallet address of the other party. And because there is no third-party organization in the transaction process, cryptocurrency payment and settlement save a lot of time compared to traditional payment methods;
  3. Low transaction fees. The transaction fee is more expensive when transferring money using online channels, banking gateways, etc., while the transaction fee using cryptocurrencies is much lower;
  4. Security. Due to decentralization, users do not need to share their identity or whereabouts with third-party institutions such as banks, nor do they need to share the details of transactions with transaction objects, which greatly improves the security of transactions. Although the anonymity of some cryptocurrencies is currently questioned, the security of transactions is still advantageous compared to traditional methods.

The Main Disadvantages of Cryptocurrencies:

  1. Incomprehensible. For the general public, “cryptocurrency” is actually a relatively abstract thing. In order not to miss this “get rich car”, many people will eventually rush to invest blindly without sufficient understanding and sufficient knowledge reserve, resulting in economic losses;
  2. There is no way to recover the wrong account. If you make a wrong transfer using cryptocurrency, the amount paid cannot be refunded. All you can do is ask your transfer recipient for a refund, but if your request is rejected by the other party, the money will never be returned;
  3. Huge price volatility. Many people feel that “one day in the currency circle, one year for others”, part of the reason is that the price of cryptocurrencies fluctuates too much;
  4. There is a lack of supervision and the environment in the circle is chaotic. Due to the anonymous nature of cryptocurrencies, many criminals use this method to carry out some illegal activities, such as fraud, money laundering, etc. However, no country in the world has adopted sound regulatory measures for cryptocurrencies. Without legal recognition by sovereign countries and lack of strong supervision, the state of cryptocurrencies is difficult to speak of sound.

To sum up, the appearance of a thing must be due to a certain social demand. After all, there will be a market if there is a demand, and if there is a market, the thing can survive. We might as well have some patience. There are pros and cons to cryptocurrencies, which need to be analyzed in combination with specific situations, and should be viewed dialectically.


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