article on crypto currency and its future

Crypto currency is a digital or virtual currency that uses cryptography for security and is decentralized, meaning it's not controlled by any government or financial institution. This has led to its rapid growth in popularity.

The first crypto currency, Bitcoin, was created in 2009 by an anonymous individual or group using the pseudonym Satoshi Nakamoto. It's still the most widely used and recognized crypto currency today.

Crypto currency is not just a form of payment, but also a store of value and a potential investment opportunity. Many people are turning to crypto currency as a way to diversify their portfolios and potentially earn higher returns than traditional investments.

As of 2023, there are over 5,000 different types of crypto currencies in existence, with new ones emerging all the time. This has led to a growing community of crypto currency enthusiasts and investors.

Cryptocurrency is a digital or virtual currency secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. This is a defining feature of cryptocurrencies.

Most cryptocurrencies exist on decentralized networks using blockchain technology—a distributed ledger enforced by a disparate network of computers. This means that there is no central authority controlling the system.

A cryptocurrency is a system that meets six conditions, as defined by Jan Lansky. These conditions include not requiring a central authority, keeping track of cryptocurrency units and ownership, and defining the circumstances of creating new units.

To create new cryptocurrency units, the system must define the circumstances of their origin and how to determine ownership. This ensures that new units are created in a fair and transparent manner.

Cryptocurrencies have no intrinsic value, meaning they are not redeemable for another commodity like gold. They also have no physical form and exist only in the network.

Here are the six conditions that a cryptocurrency must meet, according to Jan Lansky:

To trade cryptocurrencies, you can use a CFD account, which allows you to speculate on whether a chosen cryptocurrency will rise or fall in value.

Prices are quoted in traditional currencies, such as the US dollar, and you never take ownership of the cryptocurrency itself.

CFDs are leveraged products, meaning you can open a position for a fraction of the full trade value, which can magnify both profits and losses.

CFD trading on cryptocurrencies allows you to speculate on price movements without taking ownership of the underlying coins.

You can go long (‘buy’) if you think a cryptocurrency will rise in value, or short (‘sell’) if you think it will fall. Both are leveraged products, meaning you only need to put up a small deposit – known as margin – to gain full exposure to the underlying market.

Leverage is the means of gaining exposure to large amounts of cryptocurrency without having to pay the full value of your trade upfront. Instead, you put down a small deposit, known as margin.

Margin is a key part of leveraged trading, and it's the initial deposit you put up to open and maintain a leveraged position. Your margin requirement will change depending on your broker, and how large your trade size is.

Your profit or loss is based on the full size of the trade when you close a leveraged position. This means that leverage will magnify both profits and losses.

A trade on bitcoin (BTC), for instance, might require 10% of the total value of the position to be paid for it to be opened. So instead of depositing $5000, you’d only need to deposit $500.

The spread is the difference between the buy and sell prices quoted for a cryptocurrency.

In the cryptocurrency market, you'll be presented with two prices when opening a position. The buy price is slightly above the market price, while the sell price is slightly below the market price.

To open a long position, you trade at the buy price, and to open a short position, you trade at the sell price.

A pip is a unit used to measure movement in the price of a cryptocurrency, referring to a one-digit movement at a specific level.

Most valuable cryptocurrencies are traded at the 'dollar' level, where a move from $190.00 to $191.00, for example, would mean that the cryptocurrency has moved a single pip.

Some lower-value cryptocurrencies are traded at different scales, where a pip can be a cent or even a fraction of a cent.

It's essential to read the details on your chosen trading platform to understand the level at which price movements will be measured before you place a trade.

The cryptocurrency market cap has historically been dominated by bitcoin, accounting for at least 50% of the market cap value. This is a significant trend in the cryptocurrency market.

Bitcoin's value is largely determined by speculation, as well as technological limiting factors known as blockchain rewards coded into the architecture technology of bitcoin itself. This unique combination of factors contributes to the volatility of the cryptocurrency market.

The cryptocurrency market cap follows a trend known as the "halving", which is when the block rewards received from bitcoin are halved due to technological mandated limited factors instilled into bitcoin. This event has historically led to an increase in the cryptocurrency market cap, followed by a downtrend.

By June 2021, cryptocurrency had begun to be offered by some wealth managers in the US for 401(k)s, marking a significant shift in the mainstream acceptance of cryptocurrency.

Note that the total cryptocurrency market cap has historically been sensitive to the same forces that drive tech stocks and other risk assets, such as inflation forecasts.

Wash trades are a major issue in crypto-trading, with studies showing that up to 80% of trades on unregulated exchanges could be fake. This is a huge problem because it artificially inflates volume and can manipulate the price of a cryptocurrency.

Exchanges with high volumes can demand higher premiums from token issuers, which is unfair to honest traders. This is because the volume is not real, but rather a result of wash trading.

A 2019 report by Bitwise Asset Management found that 95% of all bitcoin trading volume reported on CoinMarketCap was artificially generated. This means that most of the volume you see on these platforms is not real.

Only 10 out of 81 exchanges studied by Bitwise provided legitimate volume figures, which is a concerning trend. This suggests that many exchanges are engaging in wash trading.

Cryptocurrency markets are decentralised, meaning they're not issued or backed by a government. This is a big difference from traditional currencies.

These markets run across a network of computers, and users can buy and sell cryptocurrencies via exchanges and store them in 'wallets'.

Unlike traditional currencies, cryptocurrencies exist only as a shared digital record of ownership, stored on a blockchain. This is what makes them unique and allows for secure transactions.

To understand how cryptocurrency markets move, let's look at the factors that affect their prices. Here are some key factors:

Mining is the backbone of cryptocurrency, validating transactions and adding new blocks to the blockchain. It's a process that requires significant computing power, which has led to an arms race for cheaper-yet-efficient machines since bitcoin was introduced in 2009.

A single mining operation can consume a staggering amount of electricity, with bitcoin's electricity consumption estimated to be around 7 gigawatts as of July 2019, equivalent to the energy consumed nationally by Switzerland. This has led to popular regions for mining being those with inexpensive electricity, a cold climate, and clear regulations.

Mining pools have become a common practice, allowing miners to share their processing power and split the reward equally. As of February 2018, the Chinese government had halted trading of virtual currency, but many Chinese miners have since relocated to Canada and Texas, where they can take advantage of low electricity costs and favorable regulations.

Mining is the validation of transactions on a blockchain, where successful miners obtain new cryptocurrency as a reward.

This reward decreases transaction fees by creating a complementary incentive to contribute to the processing power of the network. The rate of generating hashes, which validate any transaction, has been increased by the use of specialized hardware such as FPGAs and ASICs running complex hashing algorithms like SHA-256 and scrypt.

Mining is measured by hash rate, typically in TH/s. A 2023 IMF working paper found that crypto mining could generate 450 million tons of CO2 emissions by 2027, accounting for 0.7 percent of global emissions, or 1.2 percent of the world total.

The reward for finding a hash has diminished and often does not justify the investment in equipment and cooling facilities, and the electricity required to run them. Popular regions for mining include those with inexpensive electricity, a cold climate, and jurisdictions with clear and conducive regulations.

Some miners pool resources, sharing their processing power over a network to split the reward equally, according to the amount of work they contributed to the probability of finding a block. A "share" is awarded to members of the mining pool who present a valid partial proof-of-work.

Numerous companies developed dedicated crypto-mining accelerator chips, capable of price-performance far higher than that of CPU or GPU mining.

Bitcoin is pseudonymous, rather than anonymous, because it's tied to one or more specific keys (or "addresses") rather than a person.

Cryptocurrency owners aren't immediately identifiable, but all transactions are publicly available in the blockchain.

Some cryptocurrencies, like Monero, Zerocoin, Zerocash, and CryptoNote, implement additional measures to increase privacy, such as using zero-knowledge proofs.

A recent 2020 study demonstrated how anonymity techniques aren't sufficient safeguards against privacy attacks.

Researchers suggested new cryptographic schemes and mechanisms for hiding the IP address of the source as ways to improve privacy.

Blockchain technology is a type of next-generation business process improvement software that can radically lower the "cost of trust" between companies. It's a collaborative technology that's designed to improve business processes and has the potential to result in a radically different competitive future.

A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a hash pointer as a link to a previous block, a timestamp, and transaction data. This makes blockchains inherently resistant to modification of the data.

There are several ways to secure a blockchain, including proof-of-work and proof-of-stake schemes. Proof-of-work systems run difficult hashing algorithms to validate electronic transactions, while proof-of-stake schemes require users to show ownership of a certain amount of currency.

Some of the benefits of blockchain technology include increased transparency, accurate tracking, and a permanent ledger. It can also reduce costs and improve management of resources by collecting decentralized data and distributing it to system participants.

Here are some potential applications of blockchain technology:

Blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a hash pointer as a link to a previous block, a timestamp, and transaction data.

Blockchain is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. It's a type of next-generation business process improvement software that can improve the business processes that occur between companies, radically lowering the "cost of trust."

By design, blockchains are inherently resistant to modification of the data. This means that once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority.

A blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. Decentralized consensus has therefore been achieved with a blockchain.

There are different methods of securing a cryptocurrency network and achieving distributed consensus, such as proof-of-work and proof-of-stake schemes. Proof-of-stake is a method of securing a cryptocurrency network by requesting users to show ownership of a certain amount of currency.

The benefits of blockchain include increased transparency, accurate tracking, permanent ledger, and cost reduction. However, it also has complex technology, regulatory implications, implementation challenges, and competing platforms.

Here are some potential applications of blockchain:

A node is a computer that connects to a cryptocurrency network, supporting the network through relaying transactions, validation, or hosting a copy of the blockchain. Node owners are either volunteers, those hosted by the organization or body responsible for developing the cryptocurrency blockchain network technology, or those who are enticed to host a node to receive rewards from hosting the node network.

Timestamping is used to "prove" the validity of transactions added to the blockchain ledger without the need for a trusted third party. The most widely used proof-of-work schemes are based on SHA-256 and scrypt.

Databases play a crucial role in storing crypto market data, but they differ from blockchains in terms of performance.

Compared to the blockchain, databases are fast because they don't require a verification process, which slows down transactions.

There are several popular cryptocurrency market databases, including CoinMarketCap, CoinGecko, BraveNewCoin, and Cryptocompare.

Atomic swaps are a mechanism where one cryptocurrency can be exchanged directly for another cryptocurrency without the need for a trusted third party, such as an exchange.

This technology has the potential to increase the efficiency and security of cryptocurrency transactions.

Atomic swaps allow for the exchange of cryptocurrencies in a trustless manner, meaning that users don't have to rely on a third party to facilitate the transaction.

This is a significant improvement over traditional exchanges, which can be vulnerable to hacking and other forms of exploitation.

Non-Fungible Tokens are digital assets that represent art, collectibles, gaming, etc. They're bought and traded using cryptocurrency.

The Ethereum blockchain was the first place where NFTs were implemented. This marked the beginning of a new era in digital ownership and trade.

NFTs are stored on the blockchain, just like cryptocurrency. This makes them unique and verifiable.

Many other blockchains have created their own versions of NFTs, expanding the possibilities for digital ownership and trade.

Exchanges are businesses that allow you to buy or sell cryptocurrencies from other users at the current market price, similar to a stock. They bring their own steep learning curve as you'll need to get to grips with the technology involved and learn how to make sense of the data.

Many exchanges have limits on how much you can deposit, while accounts can be very expensive to maintain. Exchanges also offer different presets of transaction fee values during the currency conversion, but not all of them allow you to set a custom transaction fee.

Transaction fees for cryptocurrency depend mainly on the supply of network capacity at the time, versus the demand from the currency holder for a faster transaction. The ability for the holder to be allowed to set the fee manually often depends on the wallet software used.

For Ethereum, transaction fees differ by computational complexity, bandwidth use, and storage needs, while bitcoin transaction fees differ by transaction size and whether the transaction uses SegWit. In February 2023, the median transaction fee for Ether corresponded to $2.2845, while for bitcoin it corresponded to $0.659.

Some cryptocurrencies have no transaction fees, the most well-known example being Nano (XNO), and instead rely on client-side proof-of-work as the transaction prioritization and anti-spam mechanism.

Cryptocurrency payments do not come with legal protections, and transactions are typically not reversible. Once you pay with cryptocurrency, you can usually only get your money back if the person you paid sends it back.

The Financial Action Task Force (FATF) has defined cryptocurrency-related services as "virtual asset service providers" (VASPs) and recommended that they be regulated with the same money laundering (AML) and know your customer (KYC) requirements as financial institutions.

Regulators are taking steps to address concerns about cryptocurrency use in illicit finance. In June 2020, the FATF updated its guidance to include the "Travel Rule" for cryptocurrencies, a measure which mandates that VASPs obtain, hold, and exchange information about the originators and beneficiaries of virtual asset transfers.

The legal status of cryptocurrencies varies substantially from country to country, with some countries explicitly allowing their use and trade, while others have banned or restricted it. In 2021, the Library of Congress reported that an "absolute ban" on trading or using cryptocurrencies applies in 9 countries, including Algeria and China.

Regulatory clarity is anticipated to come primarily from Congress rather than the SEC, with the US Congress advancing a bill in May 2024 to provide regulatory clarity for digital assets. The bill defines responsibilities between various US agencies, including the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC).

Cryptocurrency is different from U.S. dollars in some key ways. Unlike traditional currency, cryptocurrency accounts are not backed by a government.

If something happens to your account or cryptocurrency funds, the government has no obligation to step in and help get your money back. This is because cryptocurrency is not insured by a government like U.S. dollars deposited into an FDIC insured bank account.

Cryptocurrency values change constantly, which means the value of a cryptocurrency can change rapidly, even changing by the hour. This can be a significant change, and it depends on many factors, including supply and demand.

An investment that's worth thousands of dollars today might be worth only hundreds tomorrow. And, if the value goes down, there's no guarantee it will go up again.

The legality of cryptocurrencies varies greatly from country to country. In 2021, the Library of Congress reported that 9 countries have an "absolute ban" on trading or using cryptocurrencies, including Algeria, Bangladesh, and China.

Some countries have explicitly allowed the use and trade of cryptocurrencies, while others have banned or restricted it. The US and Canada are investigating "Bitcoin scams" and ICOs in 40 jurisdictions.

Cryptocurrency networks display a lack of regulation that has been criticized as enabling criminals who seek to evade taxes and launder money. Money laundering issues are also present in regular bank transfers, however with bank-to-bank wire transfers for instance, the account holder must at least provide a proven identity.

In 2021, criminals laundered $8.6 billion worth of cryptocurrency, up by 30% from the previous year, according to blockchain data company Chainalysis. This is a significant concern, as cryptocurrency makes legal enforcement against extremist groups more complicated.

The US Congress is expected to prioritize cryptocurrency legislation in 2025, with a focus on the Stablecoin Act and the Financial Innovation and Technology for the 21st Century (FIT21) Act. This legislative push is anticipated to be the most supportive of the crypto industry to date.

In Russia, owning cryptocurrency is legal, but residents are only allowed to purchase goods from other residents using the Russian ruble, while nonresidents are allowed to use foreign currency.

In the United States, the Internal Revenue Service (IRS) has a clear stance on bitcoin's tax status.

The IRS ruled on March 25, 2014, that bitcoin is treated as property for tax purposes.

This means that virtual currencies like bitcoin are considered commodities subject to capital gains tax.