How_Money_Works_-_The_Facts_Visually_Explained

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How it works

There are two main features of a cryptocurrency. The

first is that it exists only in the form of virtual “coins”.

Instead of being generated by a national central bank,

it is created digitally by teams of specialists known

as “miners”, who use dedicated computer hardware.

Encrypted in constantly changing digital codes

to reduce the risk of counterfeiting, cryptocurrency

can be easily transferred online between individuals

independently of financial or government institutions.

The second feature is that the total amount of a

cryptocurrency is capped. Each “coin” created by

a “miner” is listed on a virtual public ledger called

a “blockchain”. Every coin spent is registered on the

same ledger, so that unlike currencies generated by

central banks, once this cap is reached no more coins

can be created. As a result, cryptocurrencies are

considered less prone to the pressures of inflation

and deflation resulting from political and economic

changes that affect conventional currency.

A form of encrypted digital currency, a cryptocurrency is created, regulated,

and kept secure by a network of computers. Bitcoin was the first example

of a cryptocurrency, but there are now many more available.

Cryptocurrency

Conventional currency

and cryptocurrency

The appeal of a cryptocurrency is that

it can be used to make direct financial

transactions anywhere without requiring

a bank account. Transactions are virtually

anonymous, there is no central control

from banks or governments, and fees are

minimal. Cryptocurrencies differ from

national currencies in many ways, such

as how they are valued, generated, and

controlled, to their storage and transfer.

$

CONTROL

Retail banks

continually monitor

transactions for signs

of suspicious activity.

Anti-counterfeiting

technology is built into

the currency in the form

of watermarks and

security threads.

STORE

Money is held in

banks with records

of account

Transactions TRANSFER holders.

are only possible via

a bank account and

they can be traced.

Fees for international

transfers can be high.

VALUE

Determined by

economic factors and

the amount of money

in circulation. Central

banks can devalue

a currency by

printing more

of it.

MAKE

Central banks

print money that is

then released into the

economy, largely by

retail banks in the form

of loans.

❯❯Cryptocurrency balance is

stored on a computer If the

currency holder’s computer

crashes and there is no back-up

of the transactions, there is no

proof of cryptocurrency funds

held by that person.

❯❯Not many retailers accept

cryptocurrency In general, the

more place that take it, the better,

but some cryptocurrencies have

specialist uses.

WARNING

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