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The Anatomy of a Cryptocurrency

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The Anatomy of Cryptocurrency


 

Although there can be exceptions to the rule, there are some factors that make cryptocurrency so different from the financial.

 

Adaptive scaling:
Adaptive scaling means that cryptocurrencies are built with measures to ensure that they will work well in both large and scales.

Other measures are in digital coins to allow for adaptive scaling including limiting the supply over time and reducing the reward for mining as more total coins are mined.

Cryptographic:
Cryptocurrency uses a system of cryptography to control the creation of coins and to verify transactions.

Value:
For something to be an effective currency, it has to have value. The US dollar used to represent actual gold. The gold was scarce and required work to mine and refine, so the scarcity and work gave the gold value. This, in turn, gave the US dollar value.

Open source:
Cryptocurrency is typically open-source. That means that developers can create APIs without paying a fee and anyone can use or join the network. Value is also created when transactions are added to public ledgers as creating a verified transaction block takes work as well.

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