Cryptocurrency and its impact on Fintech
If you’re looking for a fast-growing industry, you might have heard of cryptocurrency. This refers to decentralized currency that uses blockchain technology in the financial, technological and commercial sectors. Cryptocurrency is discussed in connection with fintech, which stands for financial technology. This is an area that explores innovative financial technology that can compete with traditional methods. Common examples include artificial intelligence, blockchain and cloud computing.
What do you need to know about fintech and cryptocurrency and what does it mean for the future? There is a reason why this area is growing so quickly.
Cryptocurrency Basics
First, it is important to cover the basics of cryptocurrency. Although many have heard of Bitcoin, cryptocurrency is so much more than that. It is a rapidly growing technological area that has already generated significant amounts of money while also contributing to the development of new technology that may become fundamental in the financial markets in the future. This has made this a popular area of study for young professionals and students.
What is cryptocurrency?
Cryptocurrency, just like other types of traditional currency, is meant to be a medium of exchange for goods and services. It is also intended to store intrinsic value. The biggest difference between cryptocurrency and traditional currency is that cryptocurrency is decentralized. This means that no central entity is responsible for governing or managing cryptocurrency. There is no bank or central government responsible for managing cryptocurrency. All information is stored digitally, and it is the network’s responsibility to verify every transaction that takes place. In addition, cryptocurrency is not subject to inflation. For example, only a limited number of “Bitcoins” will ever be released. Unlike US dollars, it is impossible to simply “print more” Bitcoins. Therefore, cryptocurrency has also been seen as an important hedge against inflation.
Understanding Blockchain
Blockchain technology was developed by the same entity responsible for inventing Bitcoin. Many believe blockchain technology was developed in response to the financial crisis of 2008. The blockchain itself is intended to act as a spreadsheet or ledger of all information related to cryptocurrency. There is no central database, but the blockchain itself is managed on computers run by people who have volunteered their computers to act as “nodes” in the chain. It’s public and anyone can do it. The block itself is encrypted using private and public keys to secure the information. Every transaction completed using cryptocurrency is stored on the blockchain. This ensures trust in the system.
What is Crypto Mining?
Crypto mining refers to the process of “mining” new Bitcoins. These coins are not invented out of thin air, but are produced when someone makes a transaction. Crypto mining aims to complete transactions and produce blocks that can be added to the blockchain while compensating crypto miners accordingly.
How does crypto mining work?
Miners are people responsible for solving mathematical algorithms to create a new block to add to the blockchain. Before a transaction can be completed, miners must solve algorithms and demonstrate a “proof of work” to the blockchain before the new block can be added. As more coins are released, the algorithms will become more challenging. That’s how the number of Bitcoins released is kept stable, preventing inflation.
As the algorithms become more complicated, most crypto miners rely on equipment to help them solve problems quickly. Some work individually, while others work in teams. So, in exchange for solving mathematical equations and adding blocks to the blockchain, the miners are compensated in Bitcoin.
Crypto security
There are several important elements involved in crypto security. They include:
- Identity and access management: First, anyone using cryptocurrency or blockchain technology must use strong identity and access management. That means using two-factor authentication, protecting passwords, and making sure all private keys are kept private.
- Key Management: Because it is so important for people to hang on to their private keys, many have external devices responsible for storing their passwords. If they accidentally lose their keys, they can lose access to the digital wallet forever.
- Privacy: Privacy is also a very important component of cryptocurrency. Many invest in strong security measures, including VPNs, to ensure that their information is not stolen. Because all information related to cryptocurrency is stored digitally, data protection is critical.
- Immutability: Immutability is also very important. Immutability means that something cannot be altered or changed. It is one of the main features of blockchain technology and people cannot tamper with the ledger in any way.
- Cryptography: Cryptography is another important component of crypto security. Essentially, it is a strong mathematical algorithm that acts as a firewall and prevents attacks from taking place. All information on the blockchain is stored cryptographically. The information on the network hides or obscures the true information of the ledger, preventing it from being stolen.
These are a few examples of the most important components of crypto security. They all work together to provide users and the network with enhanced levels of protection.
Different types of cryptocurrency
Although many people are familiar with Bitcoin and Ethereum, there are also other types of cryptocurrencies. The most basic type of cryptocurrency is digital money. They can be used as a medium of exchange for certain goods and services.
On the other hand, some tokens are intended to represent a specific type of project. This includes DeFi projects and they are linked to the value of the project itself. In essence, they are like owning shares in a project.
Another category is called stablecoins. They aim to link the value to an important external reference point to reduce volatility. Because many types of cryptocurrencies are highly volatile, stablecoins are meant to be slightly more stable compared to traditional forms of cryptocurrency.
What is Fintech?
Fintech is a portmanteau that combines the words financial and technology. It is a term that applies to new and emerging technology that helps companies deliver financial services faster and with a greater degree of security. Therefore, this is a term that can be used for a wide range of goods and services. For example, technology that allows you to trade stocks and bonds online can be considered financial technology. The aim is to let people take control of their financial lives and reduce barriers between individual users and the financial market.
There are several examples of Fintech companies, and new Fintech companies are starting up all the time. They include:
- Cabbage: This company provides small business loans using peer-to-peer lending, making it easier for people to start businesses.
- Asset front: This automated investment service aims to help people maximize the return on their investments using specific algorithms.
- Personal Capital: This company gives people access to online financial advisors and investment tools.
Cryptocurrency and Fintech
Of course, one of the biggest examples of fintech in action is cryptocurrency. Cryptocurrency exchange has grown significantly in recent years. They connect users to the financial markets, allowing them to buy and sell different types of cryptocurrencies. Furthermore, cryptocurrency uses blockchain technology, which has become popular throughout the industry. Because of the security offered by blockchain technology, it can help people reduce fraud. It increases people’s confidence in the financial markets, further expanding cryptocurrency and all companies using blockchain technology.
The Future of Fintech and Crypto
Right now, it’s hard to say what the future of fintech and crypto will look like. The only certainty is that it will play a major role in business in the future. Cryptocurrency itself has contributed to the development of a number of new technologies, including blockchain technology and cyber security, which will be fundamental to financial markets in the future.
Therefore, it is crucial for people who want to get started in this field to have the right educational background. At Keizer University, we have a wide selection of graduate programs that can give you a better understanding of fintech and crypto and how they will affect business going forward. Set yourself up for a rewarding and exciting career by applying for our master’s degree in FinTech or one of our graduate programs. Learn more about our graduate degrees today, and contact us with any questions you may have!
