What is Cryptocurrency

05 Jan

What is Cryptocurrency

Basic Knowledge, Instruction

The concept Cryptocurrency has been the hit of this last half decade. With its boom in 2017, the words Bitcoin, virtual can be heard anywhere. “Cryptocurrency” was the  most searched keyword on Google. But how this type of currency was created? And why it is so attractive?

What is Cryptocurrency?

Cryptocurrency is called encoded money or digital money. This digital currency that is is encrypted by algorithms like SHA – 256 is used in payment, exchanges of goods and services like other official currencies in the world such as USD, EUR or VND.

However, this currency was created for the purpose of exchanging digital information through a complex encrypting process. This encryption is used to ensure that transaction’s implementation and control the creation of a new coin. The first Cryptocurrency was Bitcoin (BTC) in 2008. Up to now, in the Fourth industrial technology era, there have been more than 1300 types of Cryptocurrencies launched. Except Bitcoin, all other cryptocurrencies are called Altcoins.

The creation of Cryptocurrency

History of money

Before understanding the creation of Cryptocurrency, let’s understand some basic information of money in general.

In the past, our ancestors exchanged the stuff with the same values, then used intermediates such as shells, gold, silver,…Because gold was getting rare and expensive, paper money issued by government appeared to tackled with all the previous problems.

Paper money is very convenient because of its small size and flexibility in printing, but it can be easily counterfeited. And as there is no limitation of the number of printed paper
money, the concept “inflation” emerged with the decline of money’s value.

Technology has contributed to the money’s development. Storing and using cash in big transactions is inconvenient, so people have used credit cards for savings and payment. However, there are still some shortcomings in procedures and costs so the next step of money’s development was taken: Cryptocurrency.

The creation and development of Cryptocurrency

With the launch of breakthrough inventions such as artificial intelligence, virtual reality and augmented reality, Blockchain technology,…Cryptocurrency was created. The first one was Bitcoin which was launched in 2008 by the name Satoshi Nakamoto. But until the end of 2009, this virtual currency was recognized when The new Liberty Standard introduced its conversion value $1 = 1.309 BTC.

History of Bitcoin

History of Bitcoin

  • 21th May 2010: The first real Bitcoin purchase was made when a programer named Laszalo Hanyecz used 10.000 BTC to buy two large Papa John’s pizzas in Florida.
  • August 2010: Bitcoin market was first disturbed by hackers, the sudden appearance of 184 billion Bitcoin sharply decreased the value of BTC to some cents.  
  • January 2011: Bitcoin was widely criticized for being essentially used to transact drugs on a darknet site called Silk Road.
  • In 2012: Microsoft accepted this currency in payment of applications, games and others such as Windows, Window phones, Xbox games, Xbox music or Xbox video store.
  • In 2014: Dell, Paypa accepted Bitcoin.
  • In 2015: USA recognized Bitcoin commodity, EU court ruled Bitcoin a tax-free currency. Bitcoin ATMs appeared around the world.
  • March 2016: 40 large banks in the world experienced transactions with Bitcoin
  • December 2017: Bitcoin reached the all-time high of $20.000/BTC.

After Bitcoin’s success, more than 10 Cryptocurrencies were created in the end of 2010. One of them is Litecoin which is considered a new version of Bitcoin. Thousands of Cryptocurrencies have now appeared in the market, that is the landmark of the world financial history: Cryptocurrency era.  Bitcoin is the most popular one because of its great liquidity. In 2017, Ethereum was considered the second Bitcoin which had 400 times growth.  

Advantages and disadvantages of Cryptocurrency

Advantages and disadvantages of Cryptocurrency

Advantages and disadvantages of Cryptocurrency

Advantages

  • Reduce inflation and price decrease: most cryptocurrencies are limited in quantity by the source code. For example, there will be maximum 21 million BTCs. Therefore, they will reduce inflation and price decrease.
  • Under no control of government or any organizations: Cryptocurrency is out of control of government, banks or financial organizations. The government is not able to freeze any individual or enterprise’s account.
  • Reduce transaction costs: financial frauds can not be carried out. The intermediates will be removed to reduce transactions costs. With the help of Cryptocurrency, international transfers will be faster and cheaper. Users only need a smartphone to carry out  international transactions without taking any previous procedures which can be up to 15%.

Disadvantages

Not being controlled by government, Cryptocurrency is a perfect place for black market. Besides, although it has an excellent security, you might face many risks at security if you lack knowledge about it. Hackers can make use of those network mistakes to steal money in transactions. One more disadvantage of Cryptocurrency is that there is always sharp fluctuation of its value and price, depend on its supplies. The price can rise to the top and then fall to the bottom that makes many people bankrupt.  

Will Cryptocurrency alter paper money?

Currently, we most use paper money which has many strong points. However, it also exposes some shortcomings such as risks of inflation, price decrease or difficulty in transactions and savings. People do not only care how much they have but also how valuable the money is. But when paper money is controlled by government, it is really difficult to prevent its value decrease.

Not being controlled by government banks system, Cryptocurrency is a decentralized network, its supplies and value are managed by users. The encryption decides the limited number of coins, for example, there will be maximum 21 million BTCs, the 21.000.001th BTC will never appear. Thus, the inflation will be prevented. All cryptocurrencies are operated by a mining and transaction community.  

Such currency is much more outstanding than paper money we are using now. In fact, despite prevention from anyone or anything, better one will always win the victory.  In other word, no individual or government can stop the strong development of Cryptocurrency. In the future, this currency is predicted to dominate the world’s money market.

Cryptocurrency is an evitable stage in the development of human society. In the future, when the current shortcomings are solved, this type of money will be the ship taking us to a no-cash society.

 

5 (100%) 1 vote

0 Comment

Would you like to join the discussion? Feel free to contribute!

Write a Reply or Comment