I am sure that most people have heard of cryptocurrency on the internet or in the news. However, many do not know what cryptocurrency means. Many believe it is a new type of currency.
In laymen’s terms, cryptocurrency is used to refer to a new type of digital money. Cryptocurrency is an application of a technology called blockchain. It is the medium used of exchange in the blockchain. A unit of cryptocurrency is a set of letters & numbers coded using cryptography algorithms that can be verified using the blockchain. This makes cryptocurrency virtually impossible to clone & counterfeit. A transaction between cryptocurrency is secure and extremely difficult to fake.
There is no central bank for the currency. So it is a blessing and a curse. This prevents the government from unwanted interference and manipulation of the currency. However, this makes the currency extremely volatile. With no central bank to control & maintain liquidity, an increase in demand can send the price skyrocketing. The high volatility is the main reason why the cryptocurrency is widely accepted. Just imagine planning your next week’s grocery bill with cryptocurrency.
The first cryptocurrency is Bitcoin. It is the most value cryptocurrency to date. It was created in 2009 with the first public blockchain. The creator is known as Satoshi Nakamoto (nobody knows the real name). However, the first references of cryptocurrency go back to 1983 to cryptographer named David Chaum who proposed a currency called ecash.
A blockchain is a distributed ledger connected via cryptography that records & verifies transactions. It is extremely resistant to modification of fo data. Since clones of this data are distributed among almost all the miners connected to the network, a modification in one miner does not modify every other node. A transaction is verified using multiple miners. Miners are computers who dedicate their computing power to the cryptocurrency network to process complex algorithms. They get reward with cryptocurrencies to verifies transactions. The biggest issue of this being applied to the real world is that transactions sometimes take a long time to verify. Imagine buying a coffee at Starbucks using bitcoin and waiting 10 minutes for the transaction to complete.
Now there are over 4,000 cryptocurrencies (altcoins). Each altcoin burrows the technology from bitcoin and has modifications. Some run a more optimized algorithm that makes transaction verification faster. Some are created for the sake of fundraising in a process known as initial coin offerings. Most of them attempt to fool potential investors saying that they can get the same access of buying bitcoins at $0.40 coin and selling at $19,000 a coin. Some of the coins have a genuine purpose behind it. Due to the scams facing cryptocurrencies & its anonymity led to cryptocurrency being in the bad side of government regulators.