A lot of people have visions of the bright future that cryptosporfy holds, but few understand what it actually is. Cryptocurrency is simply an internet currency, and is defined by its state of being a digital transaction, where the value of the currency is backed not only by a real asset, but also by a virtual asset. For instance, in the case of Litecoin, the virtual asset backing Litecoin is the US dollar. Each time one spends Litecoin, they are essentially converting their local currency into a virtual asset. A typical digital transaction would be something along the lines of Google buying Pagegranate for less than a dollar. This transaction uses the power of Litecoin as a form of compensation for the services rendered to them.
There are many forms of Cryptocurrency, including: fiat currencies (the most common form), and decentralized systems like the Internet FED, which distributes funds to various individuals via a distributed database. The latter is the more appealing option, as it avoids the pitfalls of centralization of power. By decentralizing power, the power is not centralized in the hands of one powerful institution, instead it is divided into many hands. This provides much more opportunity to innovation, and the free market. With a decentralized system like the Internet FED, each participant in the system can customize the incentives they receive based on their own criteria. The problem with this type of system is that if a company starts up and becomes popular, their employees will all want to start their businesses, and compete against each other for market share, which could result in the destruction of the economy.
So what should you look for in a good Cryptocurrency? A good Cryptocurrency should have low transaction fees, and be highly liquid (liquidity refers to how easy it is to trade the Cryptocurrency). Low transaction fees and high liquidity are important because when you’re purchasing Cryptocurrency, you’re often not just paying out money to the issuing financial institution, but you’re also paying a broker fee, a transaction fee, a commission, and many other fees which add up quickly. A high liquidity level ensures that if you want to sell your Cryptocurrency, you can do so quickly and easily.