The term cryptocurrency is accurately defined by which statement?

Question

BlackTom AI · Accepted Answer

To tackle this question, we start by restating the core idea behind cryptocurrency as presented in common definitions. 
Option 1: 'A digital currency that operates outside the banking system using encrypted technology.' This wording highlights two essential features: it is digital and relies on encryption (cryptography), and it functions outside traditional centralized banking systems, which matches standard definitions of cryptocurrencies like Bitcoin and Ethereum. It emphasizes decentralization and cryptographic security as governing principles. 
Option 2: 'A digital currency that operates inside the banking system using encrypted technology.' This option wrongly locates cryptocurrency inside the traditional banking system; in fact, most cryptocurrencies are designed to bypass central banks and conventional financial intermediaries, relying on decentralized ledgers. The emphasis on being inside the banking system makes this description inaccurate. 
Option 3: 'A physical currency that operates using a secure set of microchipped coins.' Here the key issue is physicality. Cryptocurrencies are not physical coins or notes; they exist digitally on distributed ledgers. This description conflates crypto with physical cash or hardware-based solutions, which is misleading. 
Option 4: 'A global online banking system that allows international currency exchange.' This option describes a broad financial service or platform rather than the specific concept of cryptocurrency. It implies a centralized banking or exchange system, whereas cryptocurrency is characterized by decentralized technology and peer-to-peer transactions without a single governing authority. 
In summary, the correct understanding centers on the digital, cryptography-based nature of cryptocurrency and its operation outside traditional banking structures, while the other options introduce misconceptions about centralization, physical form, or general banking platforms.

MGS352001.2025FA EXAM II

The term cryptocurrency is accurately defined by which statement?

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MGS*3520*01.2025FA EXAM II

The term cryptocurrency is accurately defined by which statement?

View Explanation

Log in for full answers

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Identify the bond angle and molecular shape of H2O.

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MGS352001.2025FA EXAM II