These days, online transactions are becoming the norm. Online shopping, financial and banking transactions are increasingly popular. In an effort to make online payments safer, a system called cryptocurrency has been created. Bitcoin is the best known and was the first to enter the market. Since 2009, other types of cryptocurrency have also been created (Litecoin, Namecoin, Ethereum, just to name a few). Cryptocurrency, which only exists digitally, works by using an encrypted algorithm to send payments which makes it more secure and without the need for a third party such as a bank or a financial institution. For simplicity, I will use Bitcoin as an example in this article.

Each Bitcoin has a designated value that rises and falls in much the same way that the value of a dollar goes up and down. This value is based on the willingness of the seller to accept it for the goods sold or how much the investors are willing to pay for a Bitcoin. A single Bitcoin can have a value of $ 3,500 and can be divided, depending on the value of the transaction, up to a trillionth of its value that is different from the dollar, which can be subdivided only a hundredth of its value (a penny) at most.

Bitcoins are digitally managed and transaction management via Bitcoin is almost impossible to falsify. Accounts (called wallets) that use Bitcoin are private. All cryptocurrencies use blockchain technology which is a digital system that has the total chronology of all transactions passed from the beginning to the present. Therefore, cryptocurrency accounts are not part of a bank. The transaction is managed by the user. There is no government, company or central bank that has access to a person's funds or personal information.

There are some disadvantages with cryptocurrencies. Due to the privacy of the cryptocurrency transaction, money laundering and tax evasion are possible, although past attempts have been discovered and prosecuted. Since the cryptocurrency is digital, it is not possible to access physical money. And in the event of a computer crash, a cryptocurrency balance could be canceled unless a backup copy of the positions has been created. Furthermore, the value of the cryptocurrency can fluctuate widely. Bitcoins have gone from a maximum of $ 19,000 per coin at the start of this year (January 2018) to the current value of around $ 3500 per currency (December 2018). If you would like more information on cryptocurrency, you can refer to this website:
www.corporatefinanceinstitute.com/resources/knowledge/other/cryptocurrency

Mary Fox Luquette, MBA, CLU, ChFC is a finance teacher at the B I Moody III College of Business at the University of Louisiana at Lafayette.

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