Cryptocurrency

General Information

Cryptocurrency is a currency created and maintained by algorithms. It is kept secure by encryption algorithms such as SHA-256, a commonly used encryption algorithm for other purposes like password encryption. Cryptocurrencies function both as a currency and as a virtual accounting system. Their goal is to potentially replace current government-controlled currencies, in order to provide the people with a currency that is not controlled by a middle-man, but rather by an already-set algorithm. Some business places have already started accepting cryptocurrency as a form of valid currency, but the future is still uncertain.

Technology

There is a variety of different technology, software, and algorithms that goes into cryptocurrency.

Blockchain

Blockchain technology is the core of all cryptocurrencies. Blockchain is a shared ledger that facilitates the process of recording crypto transactions and tracking assets in a business network. Anything of value that is tangible or intangible can be and be traded on a blockchain network. Blockchain is useful because it provides immediate and shared information on a ledger. Users are able to see every part of a transaction. Blockchain works by recording each transaction as a block, connecting that block to the ones before and after it, as well as blocking everything together in an irreversible chain.

Encryption

This is a method by which information is converted into a secret code that hides what the information actually means. Encrypted data is called ciphertext and the formulas used to encode and decode messages are called ciphers. Encryption is a major security tool because each cipher includes a variable that makes a ciphers output unique. So, if someone were to try and get into the code, they would have to guess the cipher that the user used to encrypt the code and they would need to guess the keys used as variables to encrypt the code as well. The most common encryption algorithm used is SHA-256, an algorithm that is used extensively for most private information on the internet, such as storing passwords when one makes an account, or personal information that should not be stored directly in a database.

Smart Contracts

Smart Contracts are a feature of only some cryptocurrencies, with the most well-known one being Etherum. These are programs stored on blockchain that work when predetermined conditions are met. These are efficient because they automate the execution of an agreement without the user's involvement. This results in less time loss. Similar to coding, they run off of “if, then, and when” statements. These statements are written into code on a blockchain. Computers do not do the transaction until they verify that predetermined conditions have been met. The blockchain is updated once the action is complete. Smart contracts are usually developed by a developer, but lately they have been used for business purposes as well.

Pros

Cons

The Future of Cryptocurrency

The future of cryptocurrency is uncertain as of right now. Although cryptocurrencies like BitCoin may have become very valuable since their creation, the cryptocurrency market is simply too unreliable and too unpredictable for cryptocurrencies to be used with as much safety as the US Dollar or other currencies. The goal for cryptocurrency is to eventually become a stable and valid currency, even more stable than the US Dollar and other government-controlled currencies, since it hopes to prevent conventional issues like inflation by setting a maximum amount of coins available for usage. Recently, however, the prices of cryptocurrencies have massively declined, and Stable Coins like Terra, which are generally meant to remain at a one-to-one ratio with the value of the USD, have dropped their value immensely. If the USD dropped 30 cents in value that quickly, it would certainly be catastrophic. Terra dropping shows that cryptocurrency is still not mature and stable enough to truly replace conventional currencies. The future, however, is uncertain and it could really go both ways for cryptocurrency.