Cryptocurrency and its impact on Fintech

If you are looking for a fast growing industry, you may have heard of cryptocurrency. It refers to the decentralized currency that uses blockchain technology in the financial, technology and commerce sectors. Cryptocurrency is discussed alongside 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’s a reason this area is growing so rapidly.

Cryptocurrency basics

First, it’s important to cover the basics of cryptocurrency. While many people have heard of Bitcoin, cryptocurrency is so much more. It is a rapidly growing area of ​​technology that has already generated large sums of money, while also contributing to the development of new technologies that could become key in the financial markets in the future. This has made this area of ​​study popular 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 meant to store the 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 administering the cryptocurrency. There is no bank or central government responsible for managing cryptocurrency. All information is stored digitally and it is the responsibility of the network to verify every transaction that takes place. Furthermore, the cryptocurrency is not subject to inflation. For example, only a finite number of “Bitcoins” will ever be released. Unlike the US dollar, it is simply impossible to “print” Bitcoin anymore. Therefore, cryptocurrency has also been seen as an important hedge against inflation.

Understanding Blockchains

Blockchain technology was developed by the same entity responsible for the invention of Bitcoin. Many believe that blockchain technology was developed in response to the 2008 financial crisis. The blockchain itself is meant to act as a spreadsheet or ledger of all information related to cryptocurrency. There is no central database, but the blockchain itself is administered on computers run by people who have volunteered their computers to serve as “nodes” on the chain. It’s public and anyone can do it. The block itself is encrypted, using private and public keys to protect your information. Every transaction completed using the cryptocurrency is stored on the blockchain. This ensures trust in the system.

What is Cryptocurrency Mining?

Cryptocurrency 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. Cryptocurrency mining aims to finalize transactions and produce blocks that can be added to the blockchain, thereby compensating cryptocurrency miners.

How does cryptocurrency 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 finalized, miners must solve the 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. This is how the number of Bitcoins released is kept stable, preventing inflation.

As the algorithms are getting more complicated, most cryptocurrency miners rely on equipment to help them solve problems quickly. Some people work individually, while other people work in teams. Then, in exchange for solving mathematical equations and adding blocks to the blockchain, miners are rewarded in Bitcoins.

Cryptographic security

There are several important elements involved in the security of cryptocurrencies. They include:

  • Identity and access management: First, everyone using cryptocurrency or blockchain technology must use strong identity and access management. This means using two-factor authentication, protecting your passwords, and making sure all private keys are kept private.
  • Key management: Because it’s so important for people to hold on to their private keys, many people have external devices responsible for storing their passwords. If they were to lose their keys, they could lose access to their digital wallets forever.
  • Data privacy: Data privacy is also a very important component of cryptocurrency. Many people invest in strong security measures, including VPNs, to ensure their information isn’t stolen. Since all information related to cryptocurrency is stored digitally, data privacy is paramount.
  • Immutability: Immutability is also very important. Immutability means that something cannot be altered or changed. It is one of the key features of blockchain technology and people cannot tamper with the ledger in any way.
  • Encryption: Encryption is another essential component of cryptographic security. Essentially, there is a strong mathematical algorithm that acts as a firewall and prevents attacks from happening. All information on the blockchain is stored cryptographically. Network information hides or hides the true ledger information, preventing it from being stolen.

These are some examples of the most important components of cryptographic security. All work together to provide users and the network with advanced levels of protection.

Different types of cryptocurrencies

While many people are familiar with Bitcoin and Ethereum, there are other types of cryptocurrencies as well. 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 meant to represent a specific type of project. This includes DeFi projects and they are related 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 peg their value to a major external benchmark to reduce volatility. Since many types of cryptocurrencies are very volatile, stablecoins are expected to be a bit more stable than traditional forms of cryptocurrency.

What is fintech?

Fintech is a portmanteau that combines the words finance and technology. It’s a term that applies to new and emerging technology that helps businesses deliver financial services faster and with greater levels of security. Thus, this is a term that can be applied to a wide variety of goods and services. For example, the technology that allows you to trade stocks and bonds online can be considered financial technology. The goal is to empower people to take control of their financial lives and reduce the barriers between individual users and the financial market.

There are several examples of Fintech companies and new Fintech companies are springing 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.
  • Wealth Front: This automated investment service aims to help people maximize returns on their investments using specific algorithms.
  • Personal capital: This company offers people access to online financial advisors and investment tools.

Cryptocurrencies and Fintech

Of course, one of the biggest examples of fintech in action is cryptocurrency. Cryptocurrency exchanges have grown significantly in recent years. They connect users to the financial markets, allowing them to buy and sell different types of cryptocurrencies. Furthermore, the cryptocurrency uses blockchain technology, which has become popular throughout the industry. Thanks to the security provided by blockchain technology, it can help people reduce fraud. This increases people’s confidence in financial markets, further expanding cryptocurrency and all companies using blockchain technology.

Future of Fintech and Crypto

Right now, it’s hard to say what the future of fintech and cryptocurrencies will be. The only certainty is that it will play a major role in business going forward. The cryptocurrency itself has contributed to the development of several new technologies, including blockchain technology and cybersecurity, which will be key to financial markets in the future.

That is why it is vital that people looking to get started in this field have the right educational background. At Keizer University, we have a wide variety of graduate programs that can give you a better understanding of fintech and crypto and how they will impact the business world moving forward. Prepare yourself for a rewarding and exciting career by applying to our Masters in FinTech or one of our graduate programmes. Learn more about our graduate degrees today and contact us with any questions you may have!

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