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What is Cryptocurrency?

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Kontributor :

Dhani Kurniawan

Cryptocurrency etymologically is composed of two words, namely crypto which refers to cryptography or coding language in the world of computers and currency that refers to the value of the currency. The definition of cryptocurrency is a digital currency mechanism that can be used to transaction virtually (via the Internet) protected by a complex computer encryption. The example most famous cryptocurrency is Bitcoin, Ethereum, Ripple, Bitcoin Cash, LiteCoin, etc.

So what distinguishes the currency that is currently commonly used, such as Rupiah currency, which is also widely used for transactions digitally? Cryptocurrency has a decentralized character, while the transaction model that has been used frequently in the community is centralized. Here's an explanation of the differences between the two character in a case study.

Centralized character is exemplified in the transaction model that has been used by the public. For example, in this case the example of an elderly person wishing to send money to his or her child abroad, then he or she is using banking services (ATM, Mobile Banking, or directly to the relevant bank) and then transferring some money to his / her child's account number. The transaction is basically done through bank intermediaries and trusted services.

While the decentralized character means that no one is a mediator or a special party who became intermediaries. The transaction is done in a peer-to-peer manner from the sender to the recipient. All transactions are recorded on computers located on the network, worldwide, or called miners (miners who help secure and record transactions on the network). Miner itself will earn commissions with virtual money used, but not everyone can be a miner, because it takes special expertise with complicated computational processing to solve cryptography used. This is one reason why cryptocurrency miners generally use high-specific and specialized computers. The nature of this decentralization is the DNA of the Blockchain system. Basically Blockchain becomes a platform that allows digital currency cryptocurrency can be used to transact.

Blockchain is a system of recording or database that is widespread on the internet, often referred to as distributed ledger. Every recorded transaction is also visible to all internet users. So Blockhain can also be defined as a ledger that can be accessed by anyone, including people who do not transact. Blockchain also has several characteristics in transactions and records, namely as follows:

  1. Have a more logical calculation
    Because based on structured mathematical calculations, even the amount of currency distribution can be predicted. So that everyone can know, three more years there will be how much digital money there is in the world. Even the inflation value can be well calculated.
  2. Have a qualified security
    The benefit of Blockchain's decentralized nature is that there is no data centered in one place. All spread to miner servers, the miners who help to secure the Blockchain network. To become a miner they must accurately solve the existing calculation algorithm, thus creating a new block (with commission in the form of nominal digital money).

That affects the value of cryptocurrency

Currency cryptocurrency fluctuations in value are based on several conditions, one of which is due to availability / scarcity. But sometimes the value also increases or decreases because of trust and usage in the community of its users. In general, the rise and fall of cryptocurrency value is influenced by market mechanism.

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The Market can be complex and happened so fast in second, minute, and hour in one system. This can be image from graph Bitcoin in USD at below picture :

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How to Cryptocurrency in Indonesia?

In Indonesia "There is no responsible authority, no official administrator, no underlying asset underlying the virtual price of currencies and fluctuating trading values that are vulnerable to the risk of inflation," Executive Director of the BI Communication Department. So the Cryptocurrency banned by Indonesian banks as financial authorities in Indonesia. Because the country cannot intervention about this currency about tax, invest, and monetary etc. Bank Indonesia Warns To All Parties Do Not Sell, Buy, or Virtual Currency Swap is the title of Bank Indonesia today about Cryptocurrency.

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