Cryptocurrency is a digital form of money that acts as a medium of exchange for individuals and businesses. It is secured through a system called cryptography: a science which utilizes encoding and decoding to keep privacy from malicious entities (also known as adversaries). Although it is not a novel invention, it has only caught the attention of the internet in the past decade.
As of 2021, it is recorded that there are more than 4,000 cryptocurrencies (also known as “coins”) in the world! However, most hold little to no value in the field. Bitcoin, Ethereum, Dogecoin, Litecoin, and Tether are examples of some of the popular coins in the market.
The most famous cryptocurrency, Bitcoin, was created in 2009 by Satoshi Nakamoto. It has been speculated that this is not a real person, but rather a pseudonym of a person or group. Bitcoin is considered the first successful cryptocurrency and is also the first cryptocurrency that implemented Blockchain (a database that allows anyone to view the transaction history of a coin).
Why is Cryptocurrency so popular?
Cryptocurrencies like Bitcoin do not function the same way as regular
money. Although they all have their
own distinct features, here are three aspects that they all share – and why
the coins are making headway in society:
1. Decentralization: Not everyone is fond of governments and banks being in control of the money supply. An entity with control of money (or anything for that matter) has the power to obscure information from its citizens or customers, leaving them with no option but to trust the entity when transacting in that currency. With the advent of Blockchain technology, however, a coin can be decentralized, thus being able to operate without the need of a central authority. Consequently, this permits anyone to view the entire transaction history of the coin – from its genesis to the present. As a result, a democratic-like system is formed, giving power to the people and removing the need for jurisdiction. This system is known as a “Peer-to-peer” (P2P) network.
2. No middleman: Paying fees, especially large ones, is something that both producers and consumers are not very fond of. P2P networks allow for the elimination of classic middlemen, such as banks, transaction processors, and financial exchanges. Cryptocurrency transactions go directly from the wallet of the buyer to the wallet of the seller, without the need for middlemen and transaction fees. The days of needing third parties for transactions are no more! But beware, if a payment mistake is made or a refund is needed, you are relying on the honesty of the counterparty to fix the error…
3. You can create and mine coins: Have you ever dreamed of being able to create your own money? If so, that dream can now become reality! Anyone that has knowledge of programming and a Blockchain system can create his or her own cryptocurrency. Although it might not be worth much, you can at least brag to your friends that you created your own dollar. Thanks, crypto! Also, remember those pirate tales that told us they would dig up buried treasure and become rich? Well, up until now, those were just stories. But cryptocurrencies can be mined, that is, can be found through solving computational puzzles. Assuming that you have enough computing power to carry out the adventure, you are all set to become a CryptoPirate (the modern, smarter, and cooler pirate). All hands hoay!
Cryptocurrency is already a major force in the financial markets, and its influence will continue to increase in the future. Alongside with the rise of AI, Biotech, and Fintech, these markets are integrating into our lives more and more every day. Who knows, maybe a cryptocurrency such as Bitcoin will soon be the leading currency in the world!
Note from the author
The Cryptocurrency division of Financial Pills researches and writes articles about cryptocurrency. The team contains multiple authors from diverse backgrounds, promoting different points of views in the articles that are written. Instead of bland, uniform, and repetitive statements that you find on many news networks, Financial Pills will give the reader a multitude of perspectives to read from, allowing for a more thorough understanding of the topics presented. More articles to be published soon. Stay tuned!
–Ioanis Philippakos, ESADE Business School