There is a lot of buzz around cryptocurrencies not just in the investment market and tech companies, like Amazon and Microsoft but also among common consumers, who are keen to know more about it. The cryptocurrency market is now worth nearly a whopping $19 billion. For the uninitiated, cryptocurrency is a digital asset designed to work as a medium of exchange that is completely stored and generated electronically. This digital currency uses cryptography to control the creation of monetary units and also to verify the transfer of funds.
Cryptocurrency has no physical form and is generally decentralized, meaning that transactions are tracked by every person on the cryptocurrency network, not by one central figure or entity (generally called the blockchain or ledger.) Since it is not backed by any government or legal entity, its supply is not determined by a central bank either. It is instead based on a decentralized network with all transactions and new currency minting performed by the users of the system.
So how did cryptocurrency first come into existence, especially without the backing of any government?
History Of Cryptocurrency
The first decentralized cryptocurrency, Bitcoin, was the creation of a shadowy figure (or group of figures) with the pseudonym Satoshi Nakamoto, who first published the Bitcoin white paper in 2008. The concept of Bitcoin was based on the idea of an open-source, ownerless, transparent currency to replace the government backed fiat currencies, which are susceptible to risk of manipulation during exchange and settlement. With a distributed ledger system, Bitcoin cannot be debased and its value cannot be manipulated by a single, controlling entity.
Following Bitcoin, many other cryptocurrencies came into existence to change the mechanics of moving money. Currently there are over 700 currencies recorded from the well-known Ethereum to the obscured Coinye West. Ether is the cryptocurrency that is powered by the ethereum network, which runs a different blockchain and “if:then” system to Bitcoin. This smart contract system allows Ethereum to be traded if a certain condition is met. Ethereum, XRP is the fastest & most scalable digital asset, enabling real-time global payments anywhere in the world. ETH became one of the world’s best-performing digital currencies with $8,204,416,132 market cap, despite a well-publicized hack. In comparison, alternative digital currency Dash has a market capitalization of $690 million, while Monero is worth about $430 million, according to price tracking website https://Coincap.io.
Cyrptocurrencies make money more efficient, with lower transaction fees, less overhead and reduced volatility risk due to instantaneous settlement and no single point of failure. It also diminishes risks associated with cyber security, and regulatory requirements.
What Is Blockchain Technology?
Although nearly everyone has heard of Bitcoin, the most famous digital currency, very few people are aware of the underlying mechanics – blockchain ledgers and decentralized transactions, or their power to change the current system of financial transactions, storage, and security systems.
A blockchain is a public ledger or list of records of all cryptocurrency transactions that take place across the peer-to-peer network, which is arranged in data batches called blocks. Each block uses cryptographic validation and references the previous block by a hashing function to link together into an unbroken chain. The ledger is not stored in a master location and neither is it managed centrally; instead it gets distributed on multiple computers at the same time so that anyone with an interest can maintain a copy of it. Users provide computational power to assist with the verification of transactions in real time (known as “mining”). Using this method of verification, every transaction ever conducted with Bitcoins is recorded in the blockchain ledger, and it is confirmed with each transaction. So effectively this permanent database that coexists in multiple locations can be seen and tracked by anyone on the network, making it highly transparent.
The technology is based on public-key cryptography and encryption meaning that the communication is secure from third parties. Consumers can complete online transactions without having to provide any personal information to merchants for verification or storage. Only a transaction record is created. So cryptocurrency transactions are considered pseudonymous and not anonymous.
Blockchain Is The Future
In fact, the decentralized blockchain technology is being seen as a massive disruptor in numerous sectors from telecommunications, healthcare, legal, cloud computing and more. The blockchain technology looks to remove any waste in the system with smart contracts and smart products.
A blockchain ledger system will revolutionize archaic financial instruments, escrow accounts, digital wallets, stocks, bonds and the securities market. It is also likely to result in a rise in Data-as-a-Service (DaaS) offerings from service providers, because an autonomous decentralized storage system would reduce costs dramatically and improve client-side encryption. Blockchain doesn’t just provide anonymity-assurance; it also ensures permanence of the data which makes it invaluable for the attribution of assets, maintenance of data records, date-stamping and geo-stamping events, and so on.
The digital currency market is making steady progress. There are new blockchain-type platforms emerging and even governments & financial institutions are now taking cryptocurrencies seriously and making huge investments in blockchain technologies.