What is a Crypto Currency?
When it comes to the intricacies of crypto currency, the realm of finance can be a difficult land to navigate without the assistance of a qualified and experienced venture capitalist like Efraim Landa. Though the topic of a crypto currency may be quite complex, all becomes rather simple with the advice of a professional private equity firm. Let’s take a comprehensive look at the basics of crypto currency.
Though the term crypto currency may sound quite foreign, the meaning is rather simple. A crypto currency is a digital medium of exchange. Back in 2009, the first crypto currency was traded under BitCoin. Since this initial crypto currency exchange, numerous crypto currencies have been created.
Essentially, they are specifications in regards to the use of currency that seek to incorporate principles of cryptography. These principles of cryptography are implemented in order to distribute, decentralize and secure data economy.
In comparison to fiat money, crypto currencies are notably different. This is due to the way that no group or individual within the crypto currency category may accelerate, exploit or significantly abuse the production of money. Only a specified amount of crypto currency is produced by the entire system mutually at a rate that is bounded by a value which is both defined beforehand and publicly known.
How it Works
When it comes to more centralized economic systems like the Federal Reserve System, governments regulate the value of currency by just printing units of fiat money or requesting additions to digital banking ledgers. It is important to keep in mind that governments cannot produce units of crypto currency. Being that they cannot provide backing for firms, banks or corporate entities which hold asset value measured in a decentralized crypto currency, you will never see our government utilizing anything like BitCoin.
The technical system from which all crypto currency is based was essential developed by the anonymous group or individual who is known as Satoshi Nakamoto. This method of currency was produced for the purpose of creating an economy where the practice of fractional reserve banking would be primarily unmanageable.
With hundreds of crypto currency specifications now in existence, most are similar to and consequent of the first fully executed crypto currency procedure. Within crypto currency systems, safety, integrity as well as the balance of all ledgers is essentially ensured by a swarm of mutually distrusting parties who are referred to as miners. These miners are generally members of the public who actively protect the network with the maintenance of a high hash rate difficulty for their chance at receiving an arbitrarily distributed fee.
Remember that subverting the foundational security of a crypto currency is in fact mathematically possible. However, the cost is unreasonably high. This is why the vast majority of crypto currencies are designed to slowly introduce new units of currency.
This is achieved by employing an eventual cap on the total amount of currency that will ever be in circulation. Basically, this is done to mimic the scarcity and value of precious metals while avoiding hyperinflation at all costs. This results in the tendency of crypto currencies to experience what is known as hyper-deflation as they grow in acceptance and the amount of the currency that is in circulation approaches the finite cap.
When compared to usual currency forms which are held by financial institutions or maintained as cash on hand, crypto currencies are all pseudonymous. However, it should be noted that additions such as Zerocoin and its dispersed laundry feature have been suggested and would allow for better anonymity.
David Chaum made some of the earliest attempts to incorporate cryptography with electronic funds through DigiCash and ecash. These both utilized cryptography to anonymize electronic money transactions though with more centralized distributing and clearing.
BitCoin was the very first form of crypto currency which was created in 2009 by pseudonymous developer Satoshi Nakamoto. Nakamoto used BitCoin as the proof of work scheme for SHA-256. For first couple of years, crypto currencies only gained attention from the media and public very progressively. However, since the year 2011, interest has increased significantly. This is largely seen in the rapid price rise of BitCoin back in April of 2013.
If you still do not fully comprehend the complexities of crypto currencies, simply see a qualified private equity firm or an experienced venture capitalist like Efraim Landa to inquire further. With over 30 years of experience in business, Efraim Landa can put you on a path to enlightenment when it comes to all things venture capital. He has extensive knowledge and experience with all forms of finance.