Even if you are already holding assets in a cryptocurrency, it’s always a good idea to review, especially with something as important as a method of payment (money). This new process of exchanging value between two entities or two people exists as virtual numbers. It is a new form of currency protected by encryption, with “keys” to unlock the process held both in public and in private.
If you were to hold a discussion on this subject just a few decades ago, you might hear the idea put forth that the world will someday be a paperless society. While human beings haven’t reached that level of existence yet, there is ample evidence for fewer transactions taking place with paper money. In addition, for several years there has been movement toward paperless reporting and auditing.
In the past, auditors and financial analysts have worked with physical documents, including ledgers and checks. This movement is parallel to the rising popularity of cryptocurrency. In both systems, the same basic elements hold true: If participants understand the technology well enough to make it work, and they monitor interactions in real time, there is belief and faith in the system just as there is with paper money printed by a government agency.
Cryptocurrencies are digital and virtual. The Oxford Dictionary defines virtual as something “almost or nearly as described, but not completely or according to strict definition.” But, with the idea of a digital/virtual currency may produce a new definition in the not too distant future.
Why? Perhaps the answer can be found when we completely understand the difference between “real” and “digital.”
Of course, the basic truth of purchasing and investing is that someone has to be paid in exchange for a product or service. In centuries past, this product or service was something that could be held in the hand or, in the case of a service, the results could be seen.
The same was true of the currency used to complete a transaction. Humans beings have long insisted on having “real” money, in the form of paper, metal, and other objects.
Cryptocurrency must become “real” in the view of both parties to a transaction for the process to work. This has happened, gradually, in the past seven or eight years. Rather than having money created and supported by a government authority, individuals and businesses are moving to an alternative currency that, to them, is very real.
Funds are exchanged between individuals or an individual and a seller, online and directly. There’s no government entity providing full faith and credit, a phrase that is intended to provide an unconditional guarantee or commitment. This commitment is made, and guarantee provided, by those who choose to use cryptocurrency.
As the transition to this currency continues, the guarantee gains strength. Traditional stores have started to accept cryptocurrency as a form of payment; online sites are increasingly doing the same, as are specific industries.
As these numbers increase, a public record is produced to monitor and control the spending of a digital currency. And there, you have full faith and credit.