Crypto Currencies are considered as a virtual payment system that generates a currency supply as well as tracks, verifies, and records transactions without involving any kind of central authority to act as an escrow. This payment system is adopted by businesses and individuals who prefer transacting over the Internet and not willing to supply ’Credit Cards’ or ’Banking information’. Cryptocurrencies are based on cryptographic techniques that use digital signatures, the main reason why cryptocurrencies are named so. Despite all the positive aspects of cryptocurrencies such as transferring funds for long-distance easily without intermediaries, cryptocurrencies have negative aspects as well. Relative anonymity in cryptocurrencies could offer a great chance for illegal transactions and money laundering to be taken place . However, the absence of the third party makes the regulatory agents unable to get involved in these systems which, on other hand, enables transactions to be exchanged without the fees attached. In contrast, the cost of transferring $1,000.00 internationally via Credit card will be around 3% or $30, and 3.9% or $39 if the transfer will be done via Paypal . In the cryptocurrencies systems, cryptography is used to legitimatize a user’s claim to a value. Precisely, cryptographic digital signatures are used to prove the ownership of a digital asset through signing a digital transaction.
While the value of fiat currencies are supported by creditworthiness of governments and banks, there is no backing source for the value of cryptocurrencies. Instead, the value of cryptocurrencies is derived solely from the expectation that others would also value and use them. Moreover, cryptocurrencies are deemed to be “pseud-anonymous” as users who own these currencies are known by their virtual currency addresses which can not be linked to the real world identity. However, cryptocurrencies systems limit the number of currencies that might be ultimately issued.
Even though there are many types of cryptocurrencies such as Riplle, Alcoins, Litecoins, etc, only one cryptocurrency grabbed a lot of attention as it made a worldwide impact. This currency is known as “Bitcoin” which is considered as a well-known example of cryptocurrency. In addition, Bitcoin is the first decentralised cryptocurrency that has a good reputation in the business field and large markets capitalization started using and accepting payments using this currency. In the following section, more details will be given about Bitcoin as an example of cryptocurrencies