What Is This Cryptocurrency Of A Thing?
Over the past one thousand years, money has changed in colour, shapes and sizes. We’ve moved from a barter system, to salt and cow-rice, to coins, then paper, to cheques, and now, the digital currency called cryptocurrency. If you’re wondering what exactly this form of currency is and how we can use it, your curiosity should end here. Let’s go back to the very beginning.
In the early 1990s, some folks called cypherpunks, thought that governments and corporations had too much power over our lives. Using cryptography, cypherpunks wanted to allow users of the internet to have more control over their money and information. DigiCash and Cybercash were both attempts to create a digital money system and by the end of the nineties, both had failed, even after meeting the checklist.
Before we continue, here’s the checklist for deciding what is a cryptocurrency:
- It must be digital. Cryptocurrency only exists on computers. There are no coins and no notes. There are no reserves for crypto in Fort Knox or the Bank of England!
- It must be decentralised. Cryptocurrencies don’t have a central computer or server. They are distributed across a network of (typically) thousands of computers.
- It must be peer-to-peer. Cryptocurrencies are passed from person to person online. Users don’t deal with each other through banks, PayPal or other. They deal with each other directly.
- Pseudonymous. This means that you don’t have to give any personal information to own and use cryptocurrency. There are no rules about who can own or use cryptocurrencies.
- It is trustless. No trusted third parties means that users don’t have to trust the system for it to work. Users are in complete control of their money and information at all times.
- It is encrypted. Each user has special codes that stop their information from being accessed by other users. This is called cryptography and it’s nearly impossible to hack. It’s also where the crypto part of the crypto definition comes from. Crypto means hidden.
- It is global: Countries have their own currencies called fiat currencies. Sending fiat currencies around the world is difficult. However, cryptocurrencies can be sent all over the world easily. Cryptocurrencies are currencies without borders!
Technically, the idea of an electronic peer-to-peer currency wasn’t truly successful until 2008, when Bitcoin was conceived. Till date, no one knows the original mother or father of Bitcoin. The Bitcoin whitepaper was made open to the public under the pseudonym of Satoshi Nakamoto. The identity of “Satoshi” is still a mystery yet to be solved. Although it is suspected that (Samsung and Toshiba) — — Satoshi; and (Nakamichi and Motorola) — — Nakamoto are the real owners. We’re still hoping that it all one day comes out. Cryptocurrency are electronic currencies and don’t physically exist, so you cannot touch or see them; and they’re powered by blockchain.
What is a blockchain you ask? Blockchain is the digital ledger where all transactions involving a virtual currency are stored. So, if you buy, sell or use your cryptocoin to buy shawarma for instance, it’ll be recorded, in an encrypted fashion, in this digital ledger. Think of blockchain technology as the infrastructure that underlies virtual coins. It’s the foundation of your home, while the tethered virtual coin represents all the products built on top of that foundation. Block chain is a record book that keeps accounts of digital transactions. Instead of having a central administrator, like a bank or the government, blockchain organises data in batches called blocks. These data batches use cryptographic validation to link themselves together. In plain words, each block identifies and references the previous block, forming an unbroken chain.
Is anyone buying goods and services using cryptocurrency? Absolutely. On May 22, 2010, now known as Bitcoin Pizza Day, Laszlo Hanyecz agreed to pay 10,000 Bitcoins for two delivered Papa John’s pizzas. In May 2010, 1 Bitcoin was 50cents, and in that year, grew to $100. Today, it is worth $9,357. Who knows what it would be by 2025? Also, Mel B, the former Spice Girls group member is the first musical artist to accept payments in Bitcoin for a former tour. Today, businesses and financial institutions are using cryptocurrency to send and receive payment from all over the world.
Because crypto is global and easy to send anywhere, trading Bitcoin and other cryptocurrencies is simple. You only need your computer and wallet to make crypto transactions, again, it is essentially a software monetary system. As soon as you own cryptocurrencies, they become like money coins: they have value and trade just as if they were wads of cash in your pocket. You can use them to purchase goods and services online, or you can tuck them away and hope that their value increases over the years.
Cryptocurrencies work as trade, similar to the first type of money system, They are traded from one personal ‘wallet’ to another- A wallet is a small personal database that you store on your computer drive, on your smartphone, on your tablet, or somewhere in the cloud. Almost like the real wallet we know. Bitcoin has succeeded where other digital cash systems failed. But why?
What is cryptocurrency doing differently? The thing that makes cryptocurrency different from fiat currencies and other attempts at digital cash is blockchain technology, as previously explained. Some people ask, are cryptocurrency transactions anonymous? The answer to this is, “it depends.” Most cryptocurrencies aren’t as anonymous as you’d think. Sure, you don’t have to supply your BVN or bank account to begin trading or investing in cryptocurrencies, but any transaction you make is still going to be recorded in the underlying digital ledger.
What can you do with cryptocurrency today? You can collect it as payment for goods and services, invest it or even mine it. There are a lot of merchants — both online and offline — that accept Bitcoin as the form of payment. They range from massive online retailers like Overstock and Newegg to small local shops, bars and restaurants. Bitcoins can be used to pay for hotels, flights, jewellery, apps, computer parts and even a college degree. Other digital currencies like Litecoin, Ripple, Ethereum and so on aren’t accepted as widely just yet.
What might be the next phase of this cryptocurrency? Developments in the world of cryptocurrency have continued since then as there are now more than 2,000 tradable cryptocurrencies with Bitcoin reigning supreme.
Quick reminder that money, in and of itself, has no actual value; its value is symbolic because it conveys the importance that people place on it. So, a concept like cryptocurrency might have no real value but it’s value has risen and will continue rising based on the importance that people place on it.
