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Cryptocurrencies (Reserve Bank Aust)

Article on Cryptocurrency by the Reserve Bank

What are Cryptocurrencies?

Cryptocurrencies are digital tokens. They are a type of digital currency that allows people to make payments directly to each other through an online system. Cryptocurrencies have no legislated or intrinsic value; they are simply worth what people are willing to pay for them in the market. This is in contrast to national currencies, which get part of their value from being legislated as legal tender. There are a number of cryptocurrencies – the most well-known of these is Bitcoin.

Activity in cryptocurrency markets has increased significantly and prices of cryptocurrencies have risen rapidly. The fascination with these currencies appears to have been more speculative (buying cryptocurrencies to make a profit) than related to their use as a new and unique system for making payments. Related to this, there has also been a high degree of volatility in the prices of many cryptocurrencies. For example, the price of bitcoin increased from around US$1,000 at the start of 2017 to around US$20,000 at the end of 2017 before falling to around US$7,000 in early 2018. The extraordinary interest in cryptocurrencies has also seen a growing amount of computing power used to solve the complex codes that many of these systems use to help protect them from being corrupted. Despite the increased level of interest in cryptocurrencies, there is scepticism among most industry experts about whether they would ever replace more traditional payment methods or national currencies.

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https://www.rba.gov.au/education/resources/explainers/cryptocurrencies.html

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