CRYPTOCURRENCY – DEFİNİTİON, FUNCTİONS, ADVANTAGES AND RİSKS

Abstract

The emergence of “virtual currencies” is extremely recent, with a history of only 13 years. Being an ultra-new economic tool, it arouses interest and effervescent reactions, especially in terms of definition, but also about the cumulative effects it has begun to produce in the economic world. The subject also becomes controversial due to the fact that, being an economic instrument of absolute novelty, it is reflected in the legislation of very few countries in the world. One of the definitions determines as virtual currency – the digital representation of the value that is not issued or guaranteed by a central bank or a public authority, which is not necessarily linked to a legal currency and which does not have the legal status of the currency, but which can be accepted by natural or legal persons as a means of exchange and which may be transferred, stored and traded by electronic means. The evaluation of cryptocurrency publications has shown that most of them are related to attempts to establish legislative agricultural work for the operation of virtual currencies. The functions of the cryptocurrencies that we have defined are: the exchange and payment function, the hoarding function, the investment function and the attraction of funds necessary for the activity. Thus, we established that virtual currencies, as well as fiduciary ones, have the role of: means of payment, means of accumulation, means of capitalization and investments. Likewise, through this research we managed to highlight the main features and peculiarities of cryptocurrencies. Among the basic characteristics of cryptocurrencies we highlight: the high degree of security, maximum speed of transactions, full freedom from financial organizations, irreversibility of operations, full anonymity of transactions, open source, they can be ”mined”. Another approach was to determine the advantages and disadvantages and risks of using cryptocurrencies. The main advantages of using cryptocurrencies are related to its functions an caracteristics, such as: it represents a real alternative to classic banking services, market freedom, privacy of transactions, high speed of trnasactions, alternative payment methos, increasing the customer base etc. On the other hand there are some disatvantages. They are related mosly with the following risks: legal uncertainty, market volatility, low degree of acceptance, unsecured crypto wallets, risks related to use for illegal or criminal purposes, money laundering risks. Taking in consideration the global trend of the digitization of the society, the share and importance of fiat currencies will tend to decrease for the benefit of virtual currencies. Cryptocurrencies are becoming a real alternative to physical currencies, but its main disadvantage is that the public autorities are missing controlling it yet. Even so, in the nearest future the money could become digital figures.