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 DIGITAL CURRENCIES

• According to multiple sources, a digital currency is defined as a digital or virtual currency that is designed to function as a method of exchange. It also applies encryption to ensure that transactions are secured and verified, and to control the possibility of creating new units of a particular digital currency.   

• Despite the excessive price increase in recent years, digital currencies have been subject to claims of price increases, but cryptocurrency trading has remained a favorite among many traders around the world, The main focus of this idea was the tripartite problem that exists between regulators.

• The possibility of prohibited use through the anonymity of the user within the modern and undeveloped exchange system; and breaches of infrastructure affected by the increase in cybercrime, Each of them influences the assessment of the role of digital currencies as a reliable investment asset class.

• The current analysis relied heavily on secondary sources found on the internet. The latter include official statements, articles, reports, monographs, and academic research papers. Because the topic is so extensive with great thanks, There is not a single topic to be dealt with in any depth, and there is no reference directly in the text to support certain phrases. 

What are digital currencies and how are they traded?

Like any currency, digital currencies can be used in the sale and purchase of goods and services. Although these digital currencies can be used to buy items, the biggest interest in these as yet unregulated currencies is to trade them for profit, with market speculators controlling their prices sometimes, as we will discuss later.

 

What is digital currency?

• The digital currency is secured by crypto so it is practically impossible for fraud or double spending to occur. The last problem, which does not exist with traditional currencies, includes the risk of double-spending of a single digital currency. Certainly, it is a potential and different obstacle for digital currencies, relatively digital information can be easily copied from individuals (albeit unknown) who understand the NL network and the software needed to control it.

• Many cryptocurrencies are decentralized networks based on "Blockchain  “technology – a distributed ledger superimposed from a disparate network of computers. Cryptocurrencies generally agree that they are not issued by any central authority, so they are theoretically resistant to government intervention or attempts at manipulation.

 

What is technology blockchain and how is it related to digital currencies?

• In order to fully understand digital currencies, we must first explore the essence of any physical transaction

• Technology: blockchain. It is a type of distributed ledger technology ( DLT), a term that includes all types of technology used to facilitate the exchange of value between users on a particular platform. It is originally a decentralized database system for aggregating stored digital information in a “block” form. In the blockchain, users create blocks of data containing information, which are then recorded peer-to-peer (P2P) over a network using a trusted device and encrypted advertising. This block of data is then linked to other users ' data templates, creating a “string”.

• A technology blockchain is known for its extreme security, short transaction times, cost-effective naturalness, and decentralized networks. To emphasize this, in this article, we will focus on one of the most discussed forms of blockchain: digital currencies.

 

History of digital currencies

• During the technology boom of the mid to late nineties, there were several attempts to create a digital currency, and systems such as Flowz, Binz, and did I cash appeared on the market, but ultimately failed. There are many different reasons for their failures, including fraud and financial problems, for example. All of these systems are known to use a trusted third-party approach, demonstrating that the companies behind them verify and facilitate transactions. Due to the failure of these companies, the creation of a digital monetary system was seen as a “lost cause” for a long time.

• In 2009 when an anonymous group of programmers under the pseudonym “Satoshi Nakamoto” presented Bitcoin. Described as a“ peer-to-peer electronic cash system", it is also decentralized, meaning that there are no servers involved and no central control authority. Somewhat the same concept as networks P2P to share jukebox files, or otherwise.

• Of course, as mentioned above, one of the most important problems that any electronic payment network must address is the problem of double-spending. Simply put, this is a fraudulent technique to spend the same amount twice. The traditional solution to counter this phenomenon has been a trusted third party – a central server – that keeps records of balances and transactions. However, this method always needs authority to basically control your money and all personal details.

• In all decentralized network transactions like Bitcoin, each participant needs to do this routine work. This is done via the Blockchain – a public ledger of all transactions made at any earlier time within the network and is available to all. Therefore, each person in the network can see the balance of each account.

• Every single transaction is a file consisting of the sender and recipient's global codes (wallet addresses) and the amount of currency transferred. The transaction also needs a signature from the sender using its code. All this is just basic encryption. Finally, the transaction is published in the network, but it must be confirmed first.

• Within the cryptocurrency network, only” miners " can confirm transactions by solving the crypto puzzle, first by taking transactions. Secondly by marking them as legitimate; and thirdly by posting them across the network. After that, each node of the network is added to its database. Once a transaction is confirmed, it becomes immutable and irreversible, and miners receive a bonus, as well as a transaction fee.

• Basically, any cryptocurrency network is based on the absolute consensus of all participants regarding the legitimacy of balances and transactions. If the network nodes conflict with one account balance, the system will basically collapse. However, a lot of rules have been programmed into the network to prevent this from happening.

 

Understanding digital currencies

According to the extensive literature on the subject, cryptocurrencies are systems that allow secure online payments that are classified in terms of virtual “tokens”, which are represented by the system's internal ledger entries. At the same time, the term “tokens” refers to the various encryption algorithms and encryption techniques that protect these entries, such as oval curve encryption, public and private symbol pairs, and hash tasks.

 

Types of digital currencies 

• As we mentioned earlier, the first digital currency based on blockchain was bitcoin, which is still the most famous in the world and also the most valuable, however, currently, there are thousands of other cryptocurrencies with different functions and specifications. Some of these are just a copy of bitcoin, while others are new coins built from scratch. Today, there are more than 18 million bitcoins in circulation, with a total market value of about 289 billion (using current market prices).

• Some of the competing digital currencies from which bitcoin's success began, known as "altcoins“, include Litecoin, per coin, and bitcoin, as well as Ethereum, Cardano, and EOS. Today, the total value of all digital currencies located in the North is 2 210 billion, plus bitcoin accounts for more than 68% of that value.

• It is worth noting that the chosen crypto used in digital currency today was originally developed for military applications. However, at some point, the US government decided to impose tight controls on encryption, similar to legal restrictions on weapons, but the right of civilians to use encryption was reserved on the basis of freedom of speech.

 

The most widespread digital currencies:

Digital currencies have not only changed the world's expectations surrounding money and financial assets, but they have also continued to develop their own space since the first bitcoin block appeared in 2009. Since that time, thousands of unique digital currencies have appeared. Of these currencies, bitcoin is still the most popular. In fact, a recent study found that 8% of Americans invested in digital currency, and of that total, 5.2% chose bitcoin. Here are some of the most popular digital currencies in the world:

1-     Bitcoin (BTC):

 More than a decade has passed since Bitcoin launched its currency into the digital space. Since that time, it has remained the most popular digital currency in the world. With bitcoin, users can easily transfer money from one digital wallet to another. Each transaction is verified by other users and is recorded on the general ledger, known blockchain.

2-     Ethereum (ETH):

 Apart from bitcoin, among digital currencies, Ethereum is highly admired. This cryptocurrency blockchain is used like bitcoin but has a completely different currency. The Ethereum currency is called ether. Like bitcoin, it is publicly managed by a network of users.

3-     Ripple (XRP):

 Although most cryptocurrencies pride themselves on providing fast transactions, Ripple – and their digital tokens known XRP – are particularly unique in their transaction speed. Ripple only takes 4 seconds to process transactions. So it's the fastest when compared to Ethereum, which takes two minutes, and bitcoin, which takes a little longer, Traditional currencies can also take a few days.