Cryptocurrency

Cryptocurrency is class of digital assets in which encryption techniques are used to regulate the generation of units of currency and verify transactions. A defining feature of these assets is that they operate independently of a central authority. Cryptocurrencies were designed to address certain problems in the banking industry, and therefore seek to attain certain characteristics such as security, immutability, speed, low cost, fungibility, and global accessibility. They are able to achieve these characteristics by utilizing blockchain technology, which is a public distributed ledger that stores transaction data.

Origins

In 2008, anonymous person under the pseudonym, Satoshi Nakomoto, published a paper titled "Bitcoin: A Peer to Peer Electronic Cash System". On January 3rd, 2009, Satoshi mined the genesis block of the Bitcoin blockchain. The Bitcoin protocol is open source code and has received contributions from numerous developers including, most notably, Hal Finney, Nick Szabo, and Gavin Andresen. In the years since, many other projects have been released that utilize Bitcoin's source code, as well as many other cryptocurrencies that have developed their own blockchain. These are known as altcoins.

Technology

Blockchain

Most cryptocurrencies use a blockch.ain to secure their network. A blockchain is a public distributed ledger that uses cryptography to achieve security without the need for a trusted third party. All transactions are stored in blocks that are linked to each other through cryptographic hashes. Each new block contains the hash of the previous block, data of the transactions it contains, and a timestamp. The design of the system makes it impossible to change the data in any given block without changing the data of all the blocks that precede it.

Use Cases

A majority of cryptocurrencies have been developed to solve problems in the financial industry. There are many other industries that cryptocurrencies are hoping to disrupt. These include, identity protection, social networking, privacy, etc... There are hopes that the blockchain will be able to serve these purposes without the need for a trusted third party. This would lead to greater security and significantly less fraud.

Cryptocurrency Markets

Exchanges

Coinbase is the largest and most widely know cryptocurrency exchange. It is used primarily to exchange fiat money for cryptocurrency and vice versa. Other popular exchanges include Bitfinex, Binance, Bittrex, Kucoin, etc... These exchanges allow users to exchange different cryptocurrencies for one another. For the most part, these exchanges use Bitcoin as a medium of exchanges rather than fiat money. A user can deposit Bitcoin onto the exchange and then trade that Bitcoin for the altcoins of their choice.

Ethical Concerns of Cryptocurrency Trading

Cryptocurrency markets are relatively very small compared to traditional securities and forex markets. Many of the assets have small market capitalizations and are therefore susceptible to having their prices manipulated. Pump-and-dump is a strategy used by people who have a large widespread influence. They can use certain techniques such as making false claims on social media and misleading their followers into buying a worthless asset, thereby increasing its price. They can then sell at the inflated price for a profit and the people that bought during the price increase are left with an overpriced asset that they will most likely lose money on.