When cryptocurrency companies first launched in 2009, they offered consumers a new payment system with digital money. Consumers were immediately interested in this technology because of its decentralization, which allows for the transfer of money and goods without the need for a third party.
What is cryptocurrency?
Cryptocurrency is digital money that can be exchanged. “Crypto” originates from the use of cryptography for security and verification purposes during transactions. When a consumer uses cryptocurrency for an exchange, cryptocurrency owners do not depend on a bank to help with these transactions and can avoid the fees that generally accompany using a financial institution. According to The Street, cryptocurrency transactions are processed and completed through a blockchain network. Blockchains are designed to be decentralized — meaning that every computer connected to a network has to confirm the transaction before it can be processed. Some think this can help create a safer transaction for everyone involved.
How do cryptocurrency transactions work?
Since cryptocurrency transactions are processed through a blockchain network, the computers in the network have to solve a complex math equation to process the payment. Once a computer solves the equation, the answer is then displayed to others in the network. If the whole network agrees that the answer is correct, that block is then added to the chain and the transaction is complete.
The complex nature of blockchain technology, including its decentralization, helps ensure that consumers’ transactions will be protected. According to Business Insider, a blockchain is a series of blocks that record data in hash functions with timestamps so that the data can’t be changed or tampered with. Since data can’t be overwritten, data manipulation is impractical. This helps eliminate centralized points that cybercriminals could target.
Considering the implications of cryptocurrency
Despite the security measures associated with blockchain technology, companies should consider the potential concerns associated with cryptocurrency. It’s important to recognize that even though blockchain technology requires multiple security layers, the potential for fluctuation of values still exists; for example, the value of currency dropping before consumers close a deal and the lack of cryptocurrency’s acceptance due to the possibility of a price dropping, transaction errors, or possibly even theft.
Even though blockchain technology has been around since 2009, cryptocurrency has only grown in popularity more recently. Despite its relevance, companies should still pay close attention to the intricacies of cryptocurrency and the possible risks associated with it before making the decision to implement this technology. If companies do consider using cryptocurrency, it’s recommended that they communicate with and educate consumers to ensure they are comfortable utilizing this technology.