While “crypto” is a simply a prefix that means secret or hidden, the term crypto as we use it today refers to a suite of digital products, tools, and stores of value that rely on cryptography to make them secure. Literally meaning “secret writing,” these products use sophisticated cryptography involving complex mathematical equations to facilitate as well as record transactions. This makes them not only impervious to prying eyes, but also impossible to duplicate or alter.
Basic Crypto Components
The most well-known, cryptocurrencies such as Bitcoin are a type of cryptoasset. Specifically used to facilitate transactions or act as a store of value, they’re often described as digital versions of cash or gold. Beyond a means of exchange, other cryptoassets can include anything else with value – such as collectibles, shares of ownership, and even assets that function much like store cards, providing access to specific products and services. The crypto world also includes something called smart contracts, which use cryptography to ensure all the terms of an agreement are met before rendering a contract fulfilled. Somewhat similar to the function of an escrow service, smart contracts differ from their cryptoasset counterparts as they perform a function rather than hold value, but are likewise an essential part of the crypto ecosystem.
Advantages of Crypto
There are many reasons why the world is shifting towards crypto, though it is essentially part of the same technological trend that is replacing many traditional products with lighter, faster digital versions. Cryptocurrency transactions are not only efficient, often taking minutes or seconds, but are also borderless and autonomous – enabling virtually instant, global transfers without the help of a third party. Using cryptography in conjunction with assets provides a unique digital identity that cannot be duplicated or manipulated. Meanwhile, the ability to facilitate agreements between multiple parties automatically, accurately, and without the cost of an intermediary makes contract fulfillment cheaper, as well as faster and more transparent.
Advancements in Crypto
Many crypto products are already available that mirror traditional financial products. Interest-bearing accounts, credit cards that offer crypto rewards, and stablecoins that act as digital versions of regular government currencies are just a few of the ways in which the crypto world is beginning to integrate with legacy finance. The complicated processes required to interact with the first iterations of cryptoassets are rapidly becoming simple, intuitive, and easy to use. Financial institutions are making large investments in crypto projects, cryptocurrency futures have begun trading on major exchanges, and governments around the world are drafting regulations for the crypto asset class. Rapidly changing, new products and services are being built every day, and the ecosystem as well as everyone in it is evolving, developing, and learning.
While crypto, like any new technology, can encounter setbacks along the way, the world of crypto is likely here to stay. In the words of Fidelity Investments CEO Abigail Johnson, “It’s not going away.”