FEATURES OF THE FORMATION AND DEVELOPMENT OF CRYPTOCURRENCIES IN THE MODERN FINANCIAL SYSTEM

Abstract

The article examines the peculiarities of the emergence and development of digital currencies in the modern financial system. It explores the formation of the first and most famous cryptocurrency, Bitcoin. Particular attention is paid to the role of Bitcoin as the first decentralized currency, which ushered in a new era of digital money and determined the further direction of the industry's development. The advantages and disadvantages of using Bitcoin in the financial sector are presented. The definition and principle of blockchain technology are described. The impact of blockchain technology on transaction security, transparency, and the reduction of the role of intermediaries is analyzed. The advantages and disadvantages of using the technology, options for applying blockchain in various sectors of the economy and other areas are presented. The reasons for the growth of cryptocurrency market capitalization are described. A rating of cryptocurrencies by global market capitalization is provided. The reasons for the growth of Bitcoin's capitalization and value are examined separately. The process of Bitcoin mining, the reward mechanism, and the concept of halving, which regulates the issuance of new coins, are considered. It shows how the halving process affects the growth of the value of Bitcoin. It highlights how some countries prohibit the mining process, while others, on the contrary, establish a clear legal framework for the development of this process. Special attention is paid to the challenges of regulation, volatility, and integration of cryptocurrencies into traditional financial institutions. The prospects for further development of cryptocurrencies, their potential impact on financial stability, and opportunities for implementing innovative models of financial interaction are explored. It shows how digital assets are transforming the global economy and changing approaches to the storage, transfer, and management of capital. It notes that Ukraine has one of the highest levels of cryptocurrency use among the population. It highlights the state of virtual asset regulation in Ukraine and the possibility of integrating best international practices.