Cryptocurrencies: An Encrypted Digital Currency

So we’ve explored how money and currencies have evolved as a medium of exchange over time, and we can start to see how cryptocurrencies can be used as a form of currency. In essence, these are the features of cryptocurrencies:

  • They are virtual and intangible
  • They exist on a decentralized network known as the blockchain
  • Transactions can be made without intermediaries

But one question remains: how are cryptocurrencies valued?

Put simply, it comes down to supply and demand. Like any other asset, its value depends on two factors:

  1. How much is someone willing to pay for it?
  2. What can I use it for? (Does it have a practical use?)

When there is high demand and low supply, the price of a cryptocurrency can surge. Conversely, when there is high supply and low demand, prices are likely to fall.

Take Bitcoin, for example. Its supply is relatively low with only 21 million coins that will ever exist. This is in contrast to national currencies, which have billions or trillions in circulation.

Various metrics, such as trading volume, circulating supply, and market capitalization, are also used to determine the value of a cryptocurrency. You can find this information on websites that track these metrics.

But what does this mean for all of us?

Money is changing. How we pay, save, spend, transfer is shaping this new wave.

Cryptocurrencies are one piece of the puzzle, but there are other significant changes too.

Decentralized finance (DeFi) is showing people a different way to earn and save. (We’ll cover this later!)

Online banking has made finance more accessible to people from all backgrounds.

Cryptocurrencies offer a new way to store money digitally.

It's difficult to predict what the future holds, but it's clear that the next decade will bring unprecedented changes to our relationship with money and finance.


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