Cryptocurrency refers to a digital asset which employs a highly sophisticated type of encryption known as called cryptography to secure and verify transactions as well as to control the creation of new units of currency. It is essentially created to work as a decentralized medium of exchange that is independent of financial institutions or any such central authority. Some examples of cryptocurrencies include Ethereum, Bitcoin, Ripple, Bitcoin Cash and LiteCoin (among other digital assets). Commodity cryptocurrency is used in commodity market for commerce.
Although the term “commodity” is used commonly, in the trading and investment context, commodities refer to another class of assets that are just like stocks and bonds. The only difference is that they are gotten from the earth: cotton, crude oil, gas, corn, wheat, oranges, gold, and uranium. They can basically be divided into agricultural, energy and metals. In a nutshell, commodities are raw materials needed by large manufacturing companies to run their businesses and which can be traded on exchanges where supply and demand set the price.
Now that we know what “commodities” and “cryptocurrencies” mean what then is ‘crypto commodity’ or ‘commodity cryptocurrency? Well, there is a debate as to what crypto commodities are comprised of because some experts are of the opinion that the blockchains used for generating tokens can be considered as crypto commodities. Others are of the opinion that CPU power can be considered as crypto commodities. Well when the interchangeability and the autonomous nature of cryptocurrencies are considered, it makes some sense to consider cryptocurrencies as a cryptocurrency. Interestingly, one of the trading institutions in the USA, the Commodities Futures Trading Commission (CFTC) declared cryptocurrency to be a commodity, thus indirectly stating that it’s not a currency or an investment vehicle. In our opinion, a crypto-commodity can be described as a tradable or fungible asset that may characterize a commodity, utility, or a contract in the real- or the virtual-world via exclusive tokens. Let’s put it in perspective; oil is considered a commodity in the physical world and there is a certain cost associated with its exploration, production and use. Crypto commodities work similarly as there is a cost that is associated with generating and using them too.
Crypto exchanges are widely credited for the vast growth in the adoption of digital crypto assets because the registration for crypto trading is straightforward and simple. This allows more people to get involved in crypto commodities. With crypto exchanges, you can withdraw your investments to your private key since the crypto commodities are not subject to financial institutions, and there is the freedom to trade on the platforms you want. There is also more protection from financial crises or market downturns as crypto commodities are considered to be safe havens that serve as insurance policies against such eventualities.
The term cryptocurrency has always been a subject of debate in trading and investment circles. We hope this article has shed some light on the term.