What is Cryptocurrency? Here's the explanation and how it works

Cryptocurrency is a currency that has become increasingly popular in recent years. In the world, there are many types of cryptocurrencies in circulation.

If dissected word for word, cryptocurrency comes from the word cryptography which means secret code and currency which means currency. In other words, cryptocurrency is a virtual currency that is protected by a secret code.

In simple terms, crypto money is a currency that has quite complex secret passwords that function to protect and maintain the security of this digital currency.

Crypto Money Is

Quoted from Investopedia, cryptocurrencies are digital currencies that are secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.

Cryptography is a method used to protect information and communication channels through the use of codes.

This use of cryptography makes the use of cryptocurrencies very difficult to manipulate. In other words, cryptocurrencies cannot be counterfeited.

Many cryptocurrencies are decentralized networks based on blockchain technology. Blockchain itself is a technology similar to a distributed ledger and is enforced by a network of different computers.

How Cryptocurrency Works

There are three keys to the way cryptocurrencies work: digital, encrypted, and decentralized.

This means that it is not the same as conventional currencies such as US dollars, Euros, and even Rupiah. Crypto is not issued by any central authority, which makes it theoretically immune to government interference or manipulation.

Thus, the task of controlling and managing this currency is entirely held by the cryptocurrency users via the internet.

Bitcoin is the first cryptocurrency. The principle of cryptocurrency has been explained by Satoshi Nakamoto in an article entitled "Bitcoin: Peer to Peer Electronic Money System" which you can access via the bitcoin.org page.

In the article, Nakamoto describes the cryptocurrency asset project as an electronic payment system based on cryptographic evidence, so it's not just trust.

The cryptographic evidence exists in the form of transactions that are verified and recorded in a program called a blockchain.

Types of Crypto Money

If you are interested in trading cryptocurrency assets or cryptocurrencies, you need to know beforehand, that there are at least 10,000 types of cryptocurrencies currently being traded.

However, currently some countries do not apply the term cryptocurrency. This is because the term tends to think of crypto as a digital currency that can be used as payment. In fact, not all countries accept crypto as a legal tender.

So far, the country that has legalized crypto as a means of payment is El Salvador. Many other countries are still struggling with crypto regulation.

In Indonesia alone, there are 229 crypto investment assets that have been registered with the Commodity Futures Trading Regulatory Agency (CoFTRA).

The following are the types of cryptocurrencies that are the most popular or have the largest market capitalization in US dollars, namely:

 Binance coins

Each of these crypto assets has unique characteristics. Like bitcoin crypto which is a crypto currency with the largest market capitalization or valuation in the world. Currently, the total bitcoin market valuation has reached US$ 671.78 billion or around Rp. 9,673.63 trillion (exchange rate of Rp. 14,400).

The second place in the cryptocurrency market is ethereum. Actually, ethereum itself is a software or software based on a blockchain network that can be accessed freely or open source.

Well, the blockchain network-based application has a crypto asset called ether. The ethereum software was created to expand the use of blockchain beyond bitcoin and can be used as a wider application.

Unlike bitcoin, which is limited in number, the supply of ethereum crypto is not limited. Currently, ethereum is trading in the range of 2,200 US dollars per chip.

Some countries consider crypto as an investment asset or can be called a crypto asset. In Indonesia itself, crypto is considered a commodity that can be traded.

Crypto has been declared legal in Indonesia since 2019 by the Ministry of Trade (Kemendag) through CoFTRA. Although legal, crypto in Indonesia is considered a commodity that can be traded, not as a means of payment.

The CoFTRA regulations that state to legalize crypto trading in Indonesia are listed in CoFTRA Regulation Number 5 of 2019 concerning Technical Provisions for the Implementation of the Physical Crypto Asset Market (crypto assets) on the Futures Exchange.

On the other hand, crypto is prohibited or illegal as a means of payment according to the regulations in Law no. 7 of 2011 concerning Currency which in the article explains that the currency issued by the Unitary State of the Republic of Indonesia (NKRI) is called Rupiah.

In Indonesia, based on data from the Ministry of Trade, until the end of May 2021, the number of investors in cryptocurrency assets or crypto currencies has reached 6.5 million people. This number increased by more than 50 percent when compared to 2020 which was 4 million people.

Cryptocurrencies are digital assets designed to work as a medium of exchange using strong cryptography to secure financial transactions, control the creation of additional units, and verify asset transfers.

MUI Fatwa Regarding Cryptocurrencies
The Indonesian Ulema Council (MUI) officially forbids the use of cryptocurrencies or cryptocurrencies as currency. The legal fatwa for crypto money was ratified at the VII Ijtima Ulama Forum in Indonesia.

As a consequence of the MUI's illicit fatwa, cryptocurrencies are illegal to trade. Cryptocurrencies are considered to contain gharar, dharar, and are contrary to Law (UU) Number 7 of 2011 and Bank Indonesia Regulation Number 17 of 2015.

The reason MUI forbids crypto is one of them because crypto currency is gharar, which means it has something that is uncertain.

That's an explanation of cryptocurrencies and their explanation.