When people heard about cryptocurrencies, some of them may think of making a trade. However, little did you know that cryptocurrencies were originally created to make peer-to-peer money transfer? This digital currency aimed not to use intermediates like banks.
To verify and secure every transaction made, cryptos use cryptography. Bitcoin (BTC) is the first crypto that was designed to create a decentralized, independent electronic payment system.
With the use of cryptography, mining (economic incentives), and proof of work (mathematical proofs), BTC can eliminate the problem of double-spending. The BTC protocol refers to an open-source where developers can review and contribute to the development. Besides, the unique features of Bitcoin open a new opportunity for many other uses such as initial coin offerings (ICOs) and smart contracts.
If you are new to the crypto market, and you can be a successful trader in the future, you can start with understanding what makes these digital currencies unique. Besides, do not forget to visit here for any financial services and discover new profitable methods.
No Central Authority and Decentralized
When it comes to traditional currencies, the financial system is being controlled by the banks and central authorities. However, cryptos do not have central authorities since any transaction can be validated and processed through an open network.
Unlike centralized banking systems, transactions in most cryptocurrencies are verified by network nodes via cryptography. After that, they will be recorded in a blockchain, which is a public distributed ledger.
Without central authorities, people will remain anonymous throughout the transaction. After submitting a transaction request, a decentralized network will then check the transaction before verifying and recording it on the blockchain.
Bitcoin and other cryptos use a public system and private key for transaction authentication. Meaning, you are free to create an anonymous identity and use a digital wallet when transacting. Above all, you have to have to worry about the security in authenticating a transaction.
Dollars, euros, and other fiat currencies come with an unlimited supply. That is because central banks can issue these currencies as much as they want. Not only that, but central banks can also manipulate the value of currencies in order to be inflationary. This means that there will be a decrease in the value of the currency in the future.
Unlike fiat currencies, most cryptocurrencies have a pre-determined, limited supply. Bitcoin comes with a maximum supply of 21 million. For instance, once it reached the limitation, there will be no new BTC to be mined. The reason behind why cryptos were created with limited supply is to prevent a decrease of value over time and currency manipulation.
Once a transaction is being recorded on a distributed ledger, users have nothing to worry about a single point of failure or vulnerability since you will have a copy of the ledger, no need for you to rely on a central system for verifying a transaction.
With that kind of transaction validation and decentralized information, you can expect less susceptible to system failure, bugs, and hacking. In other words, the blockchain technology supporting cryptos is what makes any transaction more secure.
Also Read: 4 Ways to Store Your Cryptocurrency Safely!
Immutable and Irreversible
As an immutable and irreversible form of currency, cryptos allow no one to change transactions after being recorded on the blockchain. Only the owner of the private key can perform transactions and move digital assets.
Although it is possible to modify a transaction, it isn’t easy to do such a thing due to secure cryptography. Besides, it will require you to change most of the network nodes recorded in the blockchain. To prevent fraudulence in the transactions, every single transaction is open to the public and recorded transparently.
After reading the reasons behind the uniqueness of the cryptocurrencies, do you find them more interesting? When you enter crypto trading, there are more surprising things about them that you will discover.