Perhaps the most overarching way to describe cryptocurrency is through the words of Satoshi Nakamoto, who stated upon his release of his own cryptocurrency: “Announcing the first release of Bitcoin, a new electronic cash system that uses a peer-to-peer network to prevent double-spending. It’s completely decentralized with no server or central authority” (Nakamoto, 2009). This quote arguably contains the most important aspect of cryptocurrency and the first point of focus when describing cryptocurrency: cryptocurrency is decentralized. When one thinks of banking institutions they have visited or whose services they have used, they envision a traditional brick and mortar bank (perhaps one with online banking capabilities).

You're lucky! Use promo "samples20"
and get a custom paper on
"Cryptocurrency Analysis"
with 20% discount!
Order Now

Traditional banks are made possible through centralized banking systems comprised of hierarchal boards of directors and authorities, which upholds banking laws and regulates banking actions. However, cryptocurrency does not require centralized banks to regulate its operations nor does it need a central government to produce it or distribute it. This is because cryptocurrency self-regulates in every transaction. Cryptocurrency is regulated by complex algorithms and computer programs, which enable and record transactions between or among users. This foundation allows for the existence of peer-to-peer cryptocurrency networking. Therefore, the users of cryptocurrency regulate cryptocurrency through their ongoing transactions.

The next important aspect of cryptocurrency is that cryptocurrency comes into existence through mining. Traditional money, at least in the modern age, is printed by national governments and physically circulated in the financial and banking systems. Conversely, cryptocurrency is electronically and intangibly created (by the aforementioned algorithms and computer programs). “People and organizations known as miners keep records of every transaction and attempt to solve complex computer problems that … reward them with new coins as payment” (Tillier, 2018).

This means that even without a centralized authority cryptocurrency has the ability to self-distribute and “miners” have the ability to “dig” in specific crypotcurrencies for money. Mining for cryptocurrency operates a lot like mining for gold, with a few obvious differences. First, cryptocurrency mining occurs on a node, which operates as a powerful computer. This node is connected to other nodes in the network, with which it exchanges information with other connected nodes and so on down the line. Mining on the node occurs when an unsolved “block” is found. A miner will attempt to solve a complex mathematical equation on that block. One the answer is discovered the miner reaps “the gold” or the cryptocurrency reward. Further, once the block puzzle is solved, all other miners are instantly notified about it and remove their puzzle-solving attention from that block.

Finally, another important point about cryptocurrency is that it is very unpredictable at this current point in time. This point begins with cryptocurrency’s real world value. Cryptocurrency is merely a medium that represents value, like paper dollars or gold. Thus, cryptocurrency’s value is understood through traditional currency. For example, in the article “There’s only one survivor of this year’s cryptocurrency slaughter: VeChain” writer Kate Rooney discusses a bitcoin investor named Tim Draper. Draper purchased approximately “30,000 bitcoins in 2014,” which are now estimated to be worth approximately $237 million (Rooney, 2018). This means that each individual bitcoin has a real world value. However, the value of individual cryptocurrency is based outside speculation. In 2017, as cryptocurrency became a household name, the perceived value of cryptocurrency skyrocketed, but in 2018 cryptocurrency value is dropping rapidly. Even bitcoin’s value has fallen more than 40%. This is because cryptocurrency is a new and disruptive entity in the real world. There is uncertainty surrounding its place in the established, governments-run world. Thus, because cryptocurrency is not centralized and goes against standard banking practices, it value shifts quickly as it tries to find a permanent place in the real world.