What are cryptoassets?
There are thousands of types of cryptoassets out there – or, as you might know them, cryptocurrencies. You have probably heard of a few: Bitcoin, Ripple, Litecoin and Ethereum have all been mentioned in the news. But what are they exactly?
Well, let’s start by breaking down the word ‘cryptocurrency’. The first part, ‘crypto’, comes from the Latin word for ‘hidden’ or ‘secret’. This reflects not only the secure technology used to make payments and record who owns what, but also the fact that they exist purely electronically – and there is no central bank or government to manage the system and step in if something goes wrong.
The second part, ‘currency’, explains why they were designed in the first place: they are a type of electronic cash.
Interesting:
But cryptocurrencies are not like the cash we carry. They are an alternative way of storing value, with transfers and payments occurring through a peer-to-peer system. In other words, users can send and receive the ‘cash’ directly without an intermediary such as a bank.
Some find this appealing because they think it means they have more control over their funds, and it frees them from relying on traditional financial institutions and government regulation. But there are significant risks; with no banks or central authority to protect you, if your ‘money’ is stolen or mishandled, no one is responsible for helping you get it back.
