A Cryptocurrency, like any other conventional money is a digital currency designed to function as a legal medium of exchange whereby only certain public key / private key information is known about its holder. However, there is more to cryptocurrences than just the aforementioned two. Unlike traditional currencies, Cryptocurrences are managed and controlled by a network of users with each one having an account in the system. A Cryptocurrency is usually controlled through digital certificates that are generated by the network itself. This network however, can be controlled by a company which provides such services to its clients and customers as an intermediary between them and the actual Cryptocurrency holder.
Unlike previous Cryptocurrences that were managed and governed through the involvement of central authorities or regulating bodies, this is now being managed and governed at the user’s level through the use of decentralized technologies. Decentralization refers to the empowerment of users at the distributed level to manage and control their own networks. This is done through a process called “decentralization”. Many traditional currencies are now being decentralized, as there is less regulation at the user’s level in terms of his asset holdings and management. The concept and principle of decentralized technology are not new and are being utilized by many decentralized systems such as the Internet, the World Wide Web and Peer-to-peer (P2P) networks.
Decentralized technologies allow users at the distributed level to decide on which technologies they want to be associated with and use as per their preferences and need. Decentralization also allows users to participate in the selection of technologies without requiring the involvement of any authority. In fact, most of the major online services such as eBay, Amazon and Wikipedia have embraced the concept of “Decentralization of Exchanges” or “Cryptoexchanges”. The concept of a cryptocurrence is also widely endorsed by the United States government, which is seen as the driving force behind the concept of decentralized exchange and Cryptocurrency technology. The Federal Reserve and other bodies such as the National Central Banks are drafting policies and technical solutions for implementing a global network of cryptosystems.
There are two types of Cryptocurrencies namely Cryptopayments and Fiat Cryptocurrences. Cryptopayments include assets such as gold and silver that are traded on the Forex market. Fiat Cryptocurrences includes currency pairs such as the US Dollar, the Euro and the Japanese Yen. Under a Fiat Cryptocurrence, the value of the currency is actually derived from the balance sheet of the company issuing the underlying asset.
A typical decentralizedICO project includes three components. The underlying asset, a collection of virtual currencies and theICO marketplace. Each of these components is able to serve its own purpose and have different impacts on theICO project. For instance, the actual underlying asset can serve as a store of value and act as an attractive unit of account while theICO marketplace serves as a medium through which the value of the virtual currency can be transferred from one owner to another. This process is also known as “Fiat Conversion” in some parts of the world.
The main motivation behind investing in any Crypto Currency is the potential return it offers compared to the conventional methods of investing. Therefore, one of the most important things to look out for when selecting a Cryptocurrency is the ease with which you can purchase and sell them. In this respect, it is important to consider the role of private key infrastructure or simply known as a “key wallet”. A private key wallet is what is needed in order to make the most secure transactions in the realm of Cryptocurrencies. It also helps in managing the funds automatically and makes transactions instant.