A Cryptocurrency, cryptosystem, or cryptocoin is a group of digital currency that is designed to function as a standard of trade where in currency ownership details are recorded in a distributed ledger that is public and accessible to everyone. Unlike money, which can be easily created or destroyed, cryptocoins cannot be created or destroyed. Rather, they are issued and accepted as valid currency by a central entity, often referred to as the issuer. There are many different types of cryptosystems, including centralized, self-managed, or autonomous. The decentralized variety is less well known.
With a decentralized arrangement, all relevant information is recorded on a secure server that is not owned or maintained by any one company or person. This type of arrangement is most commonly used for cryptosystems that work with multiple users who can interact with the ledger and transact within the system. Self managed and autonomous arrangements allow for users with direct access to the ledger’s source code, which are typically larger than the users of centralized and autonomous arrangements. The advantage of this arrangement is that it allows users to make their own decisions regarding the use of their funds and is more resistant to hacking or fraudulent activity.
With a centralized arrangement, a company will create and maintain its own ledger. This ledger can be accessed by all employees and may contain information about how the company derives profit, as well as other pertinent information. A company may utilize Proof of Stake as one of the methods of security to secure its ledger. A proof of stake system is implemented on a number of different types of blockchains including ripple currency, Counterchain, Distributed Ledger Protocol (DLP), and Cordless Lead Ledger.
On the other hand, decentralized systems use Proof of Authority as one of the ways of securing the ledger. It is defined as a set of rules governing the distribution of authority among users of the ledger. The use of crypto would be employed in an economy like that of the Republic of Seychelles where each citizen signs a legally binding contract with their neighbor wherein they agree to uphold the rules of the blockchain if they’re to accept the currency as payment for goods and services they engage in. The use of this mechanism is supposed to reduce the risk posed byICO (credit) scams. By limiting the amount of power a holder possesses, theICO system limits the number of his/her tokens that can be compromised.
One example of a decentralized currency ledger that makes use of Crypto is the EcoDroid. The creators of the said eco-droid built it using the Linux operating system and then added capabilities that would allow users to transact without using real money. This makes use of Cryptocash, a form of EcoDroid Fiat that functions similarly to an actual credit or debit card. All transactions made using the cryptofiat are done solely through the debit card of the owner.
As of the time of this writing, five commercial projects have made use of the EcoDroid concept. These include an investment company called FAP Turbo which uses its Nano payments system which uses proofs of staking as its proof of balance. This method of staking is meant to make sure that no fake coins are involved during transactions and thereby reducing the amount of transaction fees users are expected to pay. Another is Mistit which uses Nano payments but makes use of Proof of Assure staking which works much likeICO but involves a lower transaction fee.