Cryptocurrencies are a new craze, spanning the industries of computing and finance equally. In plain English – no jargon – cryptocurrencies are “electronic peer-to-peer currencies,” says The Motley Fool.
How cryptocurrencies and traditional currencies differ
Cryptocurrencies are different from their fiat counterparts, those that are backed by a government or declared by a government to be official tender, as cryptos lack physicality. Fiat money is created, controlled, and distributed by governments, whereas the vast majority of modern cryptocurrencies are owned and operated independently of government authority.
They also differ in that digital currency doesn’t mandate the use of financial institutions, which are regulated by governments. Cryptos, however, are likely to be subject to regulatory reform in coming years across the financial spheres of most major markets around the world.
There is at least one similarity, though
The two are similar, however, as neither of them has inherent value. In other words, both one bitcoin and one United States Dollar have zero use in the real world, though one could argue that at least a paper bill could be used to light a fire.
The tie between public stocks and cryptocurrencies
Stock is a financial concept by which individual and institutional investors alike put forth money to own portions of a company. In common use, stock refers to public stock, or business shares that can essentially be purchased by anybody across planet Earth.
Initial public offerings (IPO) are declarations by companies looking to trade their stock on public exchanges, like NASDAQ or the New York Stock Exchange, in which anybody can purchase shares of such companies before the market value of shares begin to fluctuate according to complex algorithms utilized by the NYSE or NASDAQ.
IPOs are similar to ICOs
When cryptocurrencies wish to launch and initially establish themselves on the market, they host initial coin offerings (ICO), or opportunities for investors to swap bitcoin, ethereum, or other cryptos for new cryptocurrencies being offered by causes that back them.
… Yet they are still different
ICOs are unlike IPOs in that owning digital tokens don’t offer voting opportunities. Further, they aren’t backed by any material asset.
Here’s the new investment vehicle
Security token offerings (STO) are a type of investment that signifies owners have a voting interest in the company, the ability to be programmed to proxy vote, and that they’re backed by a stake in the companies they represent.
Overstock CEO Patrick Byrne is likely to be one of the first businesspeople to pioneer this technology on a large scale, as Overstock announced it would place a $2.5 million in vestment in Elio Motors, an automaker that announced, in turn, it would soon offer the aptly-named ElioCoin to back its need for funding.