The Pros and Cons of Crypto Currency Regulation

Talk about Crypto Currency Regulation has been rampant for some time now, and is eliciting mixed reactions from investors.

There are people who believe that regulation is a good thing, while others believe self-regulation is the ticket to helping cryptocurrencies make the world a better place.

Some crypto enthusiasts are afraid regulation will kill the market. Going by recent market reactions to any news of regulations, it is clear that the crypto market is hesitant, to say the least, when it comes to regulation.

That’s part of the reason why cryptos have been falling, following consistent news of regulation in Far Eastern countries, mainly China and South Korea.

But is regulation that bad for the crypto market? Well, it depends on your perspective on the long-term direction of the market. To give you perspective on this issue, watch this blogger’s video.

 

Brief Introduction to Cryptocurrencies

 
Cryptocurrencies, sometimes called virtual currencies, digital money/cash, or tokens, are not really like U.S. dollars or British pounds. They live online and are not backed by a government. They’re backed by their respective networks.

Technically speaking, cryptocurrencies are restricted entries in a database. Specific conditions must be met to change these entries. Created with cryptography, the entries are secured with math, not people.

Restricted entries are published into a database, but it’s a special type of database that is shared by a peer-to-peer network. For example, when you send some Bitcoin to your friend Cara, you’re creating and sending a restricted entry into the Bitcoin network.

The network makes sure that you haven’t not the same entry twice; it does this with no central server or authority. Following the same example, the network is making sure that you didn’t try to send your friend Cara and your other friend Alice the same Bitcoin.

The peer-to-peer network solves the “double-spend” problem (you sending the same Bitcoin to two people) in most cases by having every peer have a complete record of the history of all the entries made within the network.

The entire history gives the balance of every account including yours. The innovation of cryptocurrency is to achieve agreement on what the history is without a central server or authority.

Entries are the Representation of Cryptocurrency

Cryptocurrencies are generated by the network in most cases to incentivize the peers, also known as nodes and miners, to work to secure the network and check entries. Each network has a unique way of generating them and distributing them to the peers.

Bitcoin, for example, rewards peers (known as miners on the Bitcoin network) for “solving the next block.” A block is a group or entries. The solving is finding a hash that connects the new block with the old one. This is where the term blockchain came from.

The block is the group of entries, and the chain is the hash. Hashes are a type of cryptologic puzzle. Think of them as Sudoku puzzles that the peers compete to connect the blocks.

Traditional Cryptocurrencies Characteristics:

  • They’re irreversible. You cannot retrieve Cryptocurrency once sent and confirmed by the network.
  • Cryptocurrencies are one way, no chargebacks.
  • They’re anonymous. Anyone can open a wallet, no ID required, and have varying stages of anonymity depending on which token you utilize.
  • They’re fast and globally accessible. Entries are broadcast across the network immediately and are confirmed in a couple of minutes.
  • They’re built to be very secure. Cryptocurrencies use the latest cryptographic techniques, but they’re in early development.
  • They have a controlled supply limited by the network.

 

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