• Why Crypto-Currencies Work

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    One of the biggest barriers to the adoption of currencies like Bitcoin is the fact that most people have difficulty believing that there could be any actual value in them. Because nothing quite like it has ever existed before, individuals are naturally reluctant to put a portion of their own net worth into it. Once you understand more about currency in general works, it’s a lot easier to understand where these new options fit into the system and why they’re so attractive to a wide variety of people.

    Modern currencies are mainly based on a general consensus that they have value. For example, the dollar in the United States stopped being tied to actual gold or silver decades ago. Instead, its value rises and falls based on how many dollars the government chooses to print and how much in goods and other currencies people are willing to give up in return for dollars. In this sense, the biggest currency in the world is no more ‘real’ than Bitcoin is.

    This was part of the reason that people began to gravitate toward the idea of cryptographic currency at all. They watched as politicians and economists made decisions that weren’t necessarily designed to benefit the public. These new digital currencies are designed to be virtually immune to manipulation. For example, the Bitcoin system is designed with an ultimate cap on the number of them that can ever exist. Each time one is created the calculations necessary to create the next become even more extensive and complex, and so it gets progressively more difficult for people to get additional coins.

    Possession of each individual unit of crypto-currency, including Bitcoins, is controlled through cryptographic keys and a record of transactions known as the blockchain. Essentially, everyone in the world has access to a detailed record of every exchange that has ever been made with these coins. As a result, anyone can get access to the information and use it to verify what happened and who should have possession of a given unit of the currency. This gives people a lot of assurance of legitimacy without requiring outside regulation.

    As more people get used to the idea that value can be held and exchanged in a form of currency that isn’t backed by a government, they’ll likely jump in and start using them to make exchanges. It offers a new level of personal control and security.

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