Innovations are key in driving progress, as can address well the challenges of society and foster economic growth across various domains like technology, science and of course business.
Cryptocurrency represents a groundbreaking innovation in the world of finance and technology, that has gained enormous popularity, reshaped various industries, and caused challenges to banking authorities globally. The foundation of this innovation lies in the creation of a decentralized digital form of currency that operates independent from traditional banking systems. Using blockchain technology, cryptocurrency clearly transformed the way we perceive and engage traditional financial systems.
Let’s explore the main concepts of cryptocurrency and blockchain technology and seek the potential developments in the digital era.
What is Cryptocurrency:
Cryptocurrency is a form of digital or virtual currency that is secured by a so far flawless cryptography. Unlike common currencies issued by governments, which are regulated by central bank authorities, cryptocurrencies operate on decentralized networks based on blockchain technology. The rise of cryptocurrencies is dominated by Bitcoin, which was created in 2009 by an unknown person or group using the pseudonym Satoshi Nakamoto.
Focusing on Bitcoin, this is defined as a private and decentralized digital currency. Therefore, not issued by any sovereign entity, fully electronic and not pegged to any assets or FIAT money. Another strong point is its protection from counterfeiting, given its robust cryptography which prevents ‘double spending’.
Some other features of Bitcoin:
Fixed Supply at 21 million bitcoins
Restrictive supply enables High Volatility
Regulated Money supply based on protocol
Transparent monetary policy given its open source
‘Consensus-based’ cannot change key features unless fully consented
Reduced transaction fees
Trustless, no need for intermediaries
Borderless transactions almost at instant
No single point of failure
Users private keys can be stored in various forms, like Crypto Wallets, Desktop wallets, paper wallets and hardware wallets, which can be Hot or Cold.
As for trading cryptos, Crypto Exchanges/VASPs are currently preferred, which are platforms or marketplaces that facilitate the buying, selling, and trading of cryptocurrencies. These are businesses that allow customers to trade cryptocurrencies or digital currencies for other assets, such as conventional FIAT money or other digital currencies. Exchanges may accept credit card payments, wire transfers or other forms of payment in exchange for digital currencies or cryptocurrencies.
What is Blockchain Technology:
At the heart of cryptocurrencies lies blockchain technology. It is a decentralized ledger that facilitates Distributed Ledger Technology (DLT). Through a collection of computers (nodes) it consents and records all transactions. Each block in the chain contains a list of transactions, a timestamp, and a reference to the previous block, forming a chronological and immutable record of transactions. Blockchain is an encrypted distributed computer filing system designed to allow the creation of tamper-proof, real-time records.
Some value-added features linked to Blockchain DLT are:
Resilient and traceable audit trail
Minimal risk of fraudulent transaction alterations
Data Transparency that can reduce information asymmetry
Streamlining Operations (i.e. for smart contracts)
Asset tokenization and fractional ownership
Blockchain DLT consists of:
Users with wallets containing keys
Transactions that are propagated across the network
Miners who produce the consensus blockchain
Some Blockchain Myths:
There is only one blockchain
Blockchain is free
Blockchain is only for large companies
Blockchain is too complex
Blockchain is completely anonymous
Blockchain is synonymous to cryptocurrencies
Blockchain will replace all traditional databases
Blockchain is a cloud-resident database
Economy Impact:
The rise of cryptocurrencies and blockchain technology has evidently disrupted traditional financial systems, however introduced new opportunities for various industries and individuals. The provision of financial services to unbanked populations, the elimination of intermediaries, the reduction of transaction costs and making financial transactions more efficient, are only a few of these opportunities. Let’s not forget the tokenization of real-world assets, such as real estate or art, allowing for fractional ownership and increased liquidity.
Viewing the opposite perspective, cryptocurrency and blockchain space faces challenges such as regulatory uncertainties, money laundering, transparency, scalability issues, and environmental concerns related to energy consumption. However, ongoing research and development seek to address these challenges in the pursuit of enhanced sustainable solutions. Cryptocurrency and blockchain technology represent a model shift in the way we think and interact with money, contracts, and ownership.
Focusing on safeguarding security awareness and transparency of the crypto environment, Infocreditgroup facilitates CipherTrace for an ease of mind.
CipherTrace, a Mastercard Company, is the world leader in cryptocurrency financial intelligence. This intelligence tool powers blockchain analytics and compliance solutions that help to grow and strengthen the crypto economy through improved security, safety and transparency. It delivers cryptocurrency AML and counter terrorism financing (CTF), blockchain forensics and regulatory monitoring solutions that make crypto assets safer.
CipherTrace’s innovative platform helps customers enhance their security and fraud monitoring activities for crypto-related programs. It enables banks, crypto exchanges, wallets, crypto ATMs and other Virtual Asset Service Providers (VASPs) to safely process cryptocurrency and digital asset transactions while reducing risk, protecting against fraud and being compliant with regulations around the world.
Article by: Phoebus Christodoulides, Fraud & Risk Analysis Manager at Infocredit Group Ltd
Infrocredit Group is a proud member of Delphi Alliance in Cyprus
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