Cryptocurrency: Confusing Signals

September was an eventful month for cryptocurrencies. Early in the month, El Salvador became the first nation to accept bitcoin, the largest cryptocurrency, as a legal tender along with the dollar. However, later in the month, cryptocurrencies received a major setback as China banned all trading and mining of cryptocurrencies. What do these contradictory signals say about cryptocurrencies? The answer to this question remains fuzzy as cryptocurrency is still an evolving concept largely confined to a niche market. But certainly, cryptocurrencies have come a long way since its invention in 2009, with more than 6,000 cryptocurrencies in existence now.

But first, what is a cryptocurrency? Simply put, it is a peer-to-peer electronic payment network where transactions are verified or validated by decentralised nodes, like computers, in the network. A cryptocurrency is usually created and run by non-state online communities that are spread across geopolitical borders. These communities draw up an agreement and cryptographic protocols to enable them to conduct secure transactions over the internet.