What is Cryptocurrency? And Why is it so powerfully polarising?

What is Cryptocurrency?

A cryptocurrency is a digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, control the creation of additional units, and verify the transfer of assets. Cryptocurrencies use decentralized control as opposed to centralized electronic money and central banking systems. I like this Wikipedia definition because it accurately introduces the concept of the “digital asset” and “decentralized control” and this is where most of the concerns, confusion, misconceptions, and trouble in the world of cryptocurrency starts. 

To understand why the trouble starts here, we have to now understand one more thing, Fiat currency, and no I am not talking about the car company. Fiat money refers to the traditional currency system that we use every day. It’s a currency that is regulated and whose value is centrally controlled by governments/regulators (e.g. central banks). It is typically what is described globally as “legal tender”. At this point, some financial scholars, economists, and those beholden to traditional financial precepts may chastise me for oversimplifying this but I will invoke Occam’s razor here. 

Types of Cryptocurrency

Bitcoin is not the only cryptocurrency in existence, but it is probably the most popular and most known. There are well over 1500 cryptocurrencies, the most popular being Bitcoin, Ethereum, Litecoin, Ripple, Monero, Stellar, and Dash.

Pros and Cons of Cryptocurrency

Here are some of the Pros and Cons of cryptocurrency.

Pros: Fraud reduction, Anonymity, Faster transaction time, lower/zero transaction fees, security, decentralized, and no more middlemen (e.g banks, financial institutions)

Cons: Limited Knowledge and Understanding, Anonymity, Volatility & Uncertainty, Global acceptance, Transaction reversibility, and No more middleman (e.g banks, financial institutions)

Cryptocurrency, bitcoin, and its siblings (over 1500 of them) are causing shockwaves throughout the financial markets. It is also poised to rattle the fundamentals of economies and traditional banking systems globally in good and in some cases bad ways. This is a source of consternation for Governments and Central Banks. And understandably so because changing the status quo to a state where it appears they have less control is not readily entertained. However, this cannot be the sole reason for not embracing the possibilities and benefits that abound.

Trevor Forrest is CEO, 876 Solutions, and a Certified Blockchain Architect with over 29 years of experience in the IT Industry in Jamaica and overseas.
trevorforrest@876solutions.com