Flipping the (Bit)coin: making heads or tails of cryptocurrency.

AuthorMonterio, Brad J.

Some historians believe King Alyattes in Sardis, Lydia, Asia Minor, created the first-known minted coin, the Lydian Lion, around 600 B.C. You know the area as Turkey. It directly preceded the minting of the first ancient Greek coins, then Roman coins, which are considered to be the genesis for many Western coins.

Coins--throughout their existence--have served as a symbol of value, were used to facilitate trade and were created from several prized materials, such as silver, gold and bronze. The images of kings queens, emperors, political leaders and animals have graced the faces of coins through the centuries. Today's coins are also made of cooper, nickel and other alloys, but the latest ones garnering much attention won't be ones you'll feed into a parking meter or vending machine.

The Rise of Digital Currency

The newest neighbor in the change purse--that is, if you could see it--is cryptocurrency. At its essence, cryptocurrency is a digital medium of exchange or, in simpler language, an electronic currency that is used to facilitate the buying and selling of items.

Cryptocurrency holds value per unit of currency, much like a coin or piece of paper money. And that value can also rise and fall, much like modern currencies. A big difference, however, is that you cannot hold it in your hand. It exists in the ether; in a virtual piggy bank, if you will.

Cryptocurrency is created using modern-day technologies called "cryptography" or "cryptology," themselves words of Greek origin relating to reading and writing secret codes. These technologies help create digital protocols that move beyond information security practices, such as encryption, to a more complex integration of mathematics, computer science, electrical engineering, data confidentiality, data integrity and data validation. In layman's terms, this is encryption on steroids.

So, is this the makings of a medium of exchange that could eliminate the need for wallets, handbags and checkbooks and change the global currency model as we know it?

Not for the Faint of Heart

There are two sides to every coin, as the cliche goes. And this applies to metal and digital coins.

A number of issues and risks surround cryptocurrency that have created headlines on an almost daily basis. This has been causing governments, regulators, central banks, commercial banks, exchanges and investors to take notice. Volatility, speculation and fraud are only a few of a variety of challenges cryptocurrency has brought about, along with how such...

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