Search

Cryptocurrencies Explained



Cryptocurrency is a representation of a digital currency used as a medium of exchange whereby financial transactions are verified and secured using cryptography.

The cryptography is a method of protecting information through the use of encrypted codes whereby the intended individuals only can encrypt and process the information.


Current Payment System

One issue of the current payment system is that it is too centralised. Every purchase made has to be verified by a third party, whereby they all charge a fee which adds up to a significant amount of money over time.


Another downside is that transactions can be extremely slow, since sometimes it takes days for a bank to guarantee that a payment has been received.


An additional issue is that companies have to store a large amount of data regarding their customers in order to determine which of their customers are trustworthy. Therefore, the sensitive data is prone to be stolen by hackers.


Peer to Peer Payment Network

Without a centralised source of information, how can one be certain that he paid when buying the item or that he has sufficient money to purchase the item?

The solution to this issue is the greatest achievement in Cryptocurrency.


Bitcoin uses a peer to peer payment network. What does a peer to peer network mean? A peer-to-peer network would allow online payments to be sent directly from one party to another without going through a financial institution. Therefore, the responsibility to maintain a trusted ledger of transactions is shared between everyone rather than one centralised firm.


Moreover, no central authority is needed, hence there are no fees and the risk of compromised data is reduced.


Benefits of Cryptocurrency

In brief, the advantages of cryptocurrencies are:

1) Expenses are reduced since the intermediary third party which verifies transaction is eliminated.

2) Sensitive data is protected from hackers since the data is not stored in one centralised system using the Peer to Peer Payment Network.

3) Transactions are much faster especially across countries since the guarantee of the bank is not required.


Risks

1) The transactions in most cryptocurrencies are anonymous, some are even untraceable. This makes it easier for illegal activities to go unnoticeable.

2) If the password is lost, all your money could be lost .

0 views

55, Level 2, Dawret ix-Xatt, Xgħajra XJR 1201, Malta

info@medinam.com   |   27 033 650

© 2020 by Medina Asset Management

Medina Asset Management is authorised and regulated by the Malta Financial Services Authority and is licenced to conduct investment services in Malta. 

  • Facebook Social Icon
  • LinkedIn Social Icon