We hear about Bitcoin and other cryptocurrencies almost every day, as they have become a global phenomenon. The majority of people though, even within the banking and the finance industry have limited knowledge about cryptocurrencies.
Cyprus Alive spoke with Viktoria Soltesz, cryptocurrency expert, accountant and tax consultant and tried to simplify things.
Cryprocurrency, is a digitally stored content, designed to work as a medium of exchange that uses cryptography, a technique that uses elements of mathematical theory and computer science and was evolved during the World War II to securely transfer data and information. Currently, it is used to secure communications, information and money online to secure its transactions, to control the creation of additional units, and to verify the transfer of assets.
Cryptocurrencies are not controlled by central banks systems as opposed to other currencies. The decentralized control of each cryptocurrency works through a blockchain, a continuously growing list of records, called blocks, which are linked and secured using cryptography. Blockchain can record transactions between two parties efficiently and in a verifiable and permanent way. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority.
Currently there are discussions from various authorities to put these currencies under their control as they have big fluctuation and can be of a high risk.
The most well know cryptocurrency is the Bitcoin, which was created in 2009. Since then, numerous other cryptocurrencies have been created. These are frequently called altcoins, an abbreviation of “Bitcoin alternative,” and this describes other cryptocurrency except for Bitcoin.
A cryprocurancy transaction is known almost immediately by the whole network. But only after a specific amount of time it gets confirmed.
When a transaction is confirmed, it is set in stone. It cannot be reversed; it is part of an unchangeable record of historical transactions of the blockchain.
The only people, who can confirm transactions, are the miners. They are adding transactions to the blockchain (securing and verifying) and also releasing new currency. Individual blocks added by miners should contain a PoW (proof-of-work).
A well know term in cryptocurrency is the ICO (initial coin offerings). Which can be a source of capital for start-ups. ICOs bypass the demanding and regulated capital-raising process required by venture capitalists or banks. ICOs are consider to be very risky and recently were some cases of fraud that involved ICOs
Cyprus is one of the biggest acceptor of the cryptocurrencies world wide, due to the high number of Fin-tech companies. University of Nicosia is one of the first to accept Bitcoin payment for tuition fees. They also have regular seminars on the subject. In Cypus many purchases online are paid by cryptocurrencies and it is expected that more purchases and transactions will be made with cryprocurrencies within the next few years.
Cryptocurrencies have the potential to create big return on investment, but they also contain high risks and sometimes unpredictable ones, therefore one should do a good research before using any cryptocurrency.