The primary difference between cryptocurrency and traditional paper cash is that cryptocurrencies are not managed by any kind of central governmental authority.
Kennesaw State University professor Khawaja Saeed, chair of the Department of Information Systems, detailed the rapid expansion of cryptocurrencies around the globe to Rome Rotary members.
The KSU professor called Bitcoin the genesis cryptocurrency, though there are many other forms computer cash. In fact, as of April 2021 there are more than 10,000 cryptocurrencies around the world.
Saeed explained that cryptocurrency was created out of anger during the Great Recession a little more than a decade ago. People were not happy with the crash and wanted to create a separate financial system.
Unlike a bank or other financial institution that is the custodian of someone’s cash, cryptocurrencies are a digital system that provides a record of ownership and the ability to transfer that ownership.
“In the crypto space, you do not have any single institution, it’s a distributed system that is owned by millions of people around the world,” Saeed said. “When a data file (a transaction) is created, it is distributed across millions of computers across the platform.”
“In a traditional (banking) system, if it goes down, you can’t retrace those (transactions),” Saeed said. “If you shut down half of Bitcoin’s computers, it will still operate because the other half will still have the same level of record.”
In order to buy a cryptocurrency ... well, there’s an app for that.
Applications like Coinbase or Robinhood allow people to trade cryptocurrencies in an exchange market — think stocks.
Bitcoin mining is a two fold process. Computers solve complex math problems on the Bitcoin network and as a result produce new bitcoin. And by solving computational math problems, miners keep the network trustworthy and secure by verifying transaction information.
The bitcoin system can be hacked, however Saeed explained that the system uses a very sophisticated encryption system.
“I am not going to say it’s foolproof,” Saeed said.
Financial advisor Bruce Hunter said while the system could be hacked, a ledger that is validated in every transaction remains in place.
“If (your) whole network goes down, you’re not erasing everything. It’s on multiple computers, in total agreement, all the way back to 2011,” Hunter said.
Japan became one of the most important countries to recognize bitcoin as legal tender in 2017, which helped push the value of the currency higher.
Bitcoin will be considered a legal form of currency in the U.S., alongside its primary currency the dollar, after Sept. 7. A single bitcoin was valued at $32,428 at midday Thursday.
“These currencies are going to keep on evolving, but those (traditional) currencies are not going away any time soon because governments have too much stake invested in them,” Saeed said.