Overview
Crypto currencies are technology that was built to function as a form of money, and a payment system.
Traditional currencies mostly function by way of an intermediary , the bank. The bank keeps of ledger of accounts that tracks how much money each account holder has. When a payment is made from one account to another, the bank is responsible for updating the balances of each account.
A crypto currency sets up a public ledger (typically using block chain technology). The ledger is designed so that changes to it can be made only by agreement of servers hosting the ledger. That is, there is no central party that maintains the ledger
Crypto Currencies vs Centralized Finance
Centralized finance is a type of account based payment where transactions between two individuals is accomplished through a central player (such as a bank). The central player maintains a ledger which it updates as the individuals engage in transactions.
Centralized finance has a number of features.
- Payments managed by a central player are easier to regulate
- When there are multiple central players, coordination is required to execute a transaction. This can cause risk, and will slow the transaction down.
Crypto currencies seek to create a decentralized, distributed ledger which users can engage with anonymously. Crypto currencies use a block chain as the ledger. This generally has the following properties.
- Secure
- Anonymous
- Transparent - transactions on the blockchain, while anonymous, are still viewable by all, and therefore transparent. There are some implementations which remove this transparency.
- Reduced Costs - crypto currencies can eliminate the need for an intermediary, and this has the potential to reduce those costs.
Analysis Forecasting and Trading
- Technical Analysis - the tools of standard technical analysis can be used to assess crypto-currency price trends.
- Valuation
- Initial Coin Offering
Crypto and Securities Law
Crypto Currencies and the law is an area that is actively evolving . As long as the currency is not endorsed by the state, it will not act as official currency, even though it may function like a currency. As a store of value and a mechanism of possible return, crypto currencies may be subject to Securities law.