Unlike the bank, for example, that all the transactions made through it are recorded only in his computer, the encrypted digital currency runs simultaneously on thousands of computers and registered by them. In addition, it is issued in a limited quantity and is known in advance, but it can grow in a controlled manner over time

Encrypted digital currency.

A new financial product that has been gaining momentum in recent years, and even more so in recent months. The digital currency is issued by any private body that develops a technology that can not be duplicated. The currency usually does not belong to the body that issued it but is open to everyone. In fact, this is a protocol (software) that ran parallel to thousands of computers and was registered by them. This means that the currency is in a distributed database. This is in contrast to the bank, for example, that all the transactions made through it are recorded only in the bank's computers. Encryption causes the amount produced by the coin to be limited and known in advance, but it can grow in a controlled manner over time. Determining a limited amount is important in order to avoid a decrease in the value of the currency (inflation).

Encryption is also intended to ensure that the transfer of coins from person to person will be recorded in thousands of computers and approved by them. This technique is designed to prevent duplication of the coin and its reuse by the same person after it is sent to another person.

The issuer body tends to keep a certain percentage of its currency. If the value of the currency increases (in terms of regular currencies such as dollars or euros), of course, profits will be generated.

The encrypted digital currency that is issued is offered to the general public as a means of paying for various products and services. The public determines its value in deals between people. Each transaction is recorded in the database of thousands of currency users - and transparent to everyone. However, the identity of users in the currency is confidential. Each user needs a personal code (key) to access and use his coin dump. The value of the currency derives from the extent of its possible uses, the ability to convert it into state currencies easily and at a low cost, and especially the level of trust that the trading public gives.

The main advantage of digital currency is the fact that it is easy to transfer it from person to person through computers or smartphones, without paying any commission to a broker (bank). Another advantage is that the currency is not regulated, and therefore it is not possible to collect tax on various transactions.

Lack of supervision is also the main disadvantage. A person who has lost his personal code (which may happen, of course) will not be able to reach his store of Bitcoins. This is analogous to the loss of a wallet with cash. The loss of such a wallet removes the lost coins from circulation.

If the personal code is not complicated enough it will be possible to break it and "steal" the coins. In recent years, there have been several cases of "theft" of digital coins that have damaged trust in them. This nature of the digital currency makes it problematic in terms of the ability to maintain "wealth" or "value" over time. And there are other disadvantages, the most important of which is the high volatility in its price, as a result of speculators who buy and sell it. This volatility indicates a difficulty in maintaining value and making it a means of payment. There are also other disadvantages, such as the ability to launder black capital and buy illegal products (of course, there are those who see it as an advantage).

The first digital currency used is Bitcoin. Bitcoin was first issued in 2009 by an anonymous developer (or anonymous group of developers) named Satoshi Nakamoto. Bitcoin was initially traded at a value of about 5 cents. In 2013, Bitcoin jumped quickly, and towards the end of the year it reached a price of about $ 1,000. The following year, they dropped to about $ 250 and moved around that value for several months. Gradually, businesses around the world began to announce that they were ready to receive Bitcoin as payment for products and services. Governments remained suspicious and the use of Bitcoin was still limited. It is impossible, for example, to pay taxes in Bitcoin.

The Bitcoin remained very volatile but its value rose sharply. At the beginning of 2017 he returned to trade at about $ 1,000. In recent months demand for the currency has gained momentum, and by the end of May it reached a record price of $ 2,700. Parallel to the jump in the value of Bitcoin was also a jump in the value of another digital currency called Atrium. This currency, which was first issued in 2015, started out with a few cents. At the beginning of 2017, Atrium was trading around $ 8 per unit. However, since its price soared, in mid-June it touched a price of $ 400. Since then he has fallen slightly and returned to the price of about $ 300.

The success of these two coins, and the limited success of other digital currencies, led to a wave of digital currency offerings. The jump in the prices of digital currencies has of course created great wealth for currency issuers and early investors. However, respected financial institutions claim that these currencies are the opening for many scams, and believe that the sharp jump in their price embodies all the hallmarks of a financial bubble. In the way of bubbles, they warn, the bubble will burst in a short time and leave behind a lot of losers.