But Bitcoin is not the only show in the town.
In the Crypto world, there are tons of other cryptocurrencies that modeled after bitcoin and built on a decentralized peer-to-peer network too.
However, many people still don’t know much about cryptocurrency and blockchain technology.
By writing this in plain and simple language, I hope that I can help you understand the basic concepts and see the potential of cryptocurrency.
It can completely change someone’s life in the coming years: more equality, more wealth, more choice, more efficient and more freedom.
A Brief History of Cryptocurrency
Before we talk about the cryptocurrency, it’s important to learn about its origin and history.
If you don’t know, this seemingly explosive crypto shift is actually a result of decades of mathematical research, dedicated experiment and forward thinking.
It all started with the Cypherpunk movement in the late 1980s.
In 1983, David Chaum, a cryptographer was the first person to propose cryptocurrency. He published a paper called Numbers Can Be a Better Form of Cash than Paper, discussing topics on pseudonymous reputation systems and digital cash.
Since then small groups of cryptographers, mathematicians and hackers have been working to make the public-key encryption idea into a reality.
They aimed to protect individual freedom with the tools of encryption.
But it’s not until 2009 that the first public cryptocurrency, Bitcoin was invented and the concept of blockchain was introduced to a wider audience.
Satoshi Nakamoto, the creator of Bitcoin whose identity is unknown, is believed to be a part of this cypherpunk group.
Guess what?
A simple idea to keep information private, safe and secure may just change the world for the better.
What is Cryptocurrency?
Based solely on the word itself, you can see that it’s made up of two words cryptography and currency.
Put simply, cryptocurrency is a virtual or digital currency that uses cryptography to secure and verify worldwide functioning, payment and transactions.
And according to the ancient Greeks, cryptocurrency is derived from two words, “kryptós” and “graphein” which mean “secret” and “writings”.
Today, this secret writing is commonly referred to as encryption in which ordinary plain text is converted into humanly unintelligible text and vice-versa. This is achieved through highly complex algorithms and mathematical equations.
While Bitcoin is widely accepted as a pioneer in the cryptosphere, there are more than 2,000 cryptocurrencies in existence as of this writing.
These virtual currencies are collectively known as altcoins, each has their own blockchains, wallets and miners.
Here are some of the popular altcoins out there:
Developed by people all over the world, cryptocurrencies are live and ongoing projects. But the Cypherpunk in the early times couldn’t truly materialize the concept of cryptocurrency because no one had invented Blockchain technology by then.
Anyone who is new to the cryptosphere may think that cryptocurrency and blockchain is the same thing. Although they’re commonly used as interchangeable terms, they are not the same thing.
Photo credit: maketecheasier.com
What is Blockchain?
COMMON MISTAKE: Blockchain is the technology underlying Bitcoin.
Truth- blockchain is only one of the 4 foundational technologies behind bitcoin (Blockchain, Peer-to-Peer Network, Proof-of-Work and Cryptography).
So what exactly is Blockchain?
As its name suggests, Blockchain is a “chain of blocks”.
The easiest way to understand blockchain is to think it as a digital ledger that is organized into blocks.
And every block contains a cryptographic hash of the previous block, a timestamp and transaction information.
These blocks are then linked together using cryptography and form the structure of blockchain.
Unique features of Blockchain
What makes Blockchain unique is that instead of having a person/company/institution storing all the transactions on a server, the blockchain is distributed and decentralized.
- Distributed and decentralized.
This means that anyone anywhere in the world with an Internet connection can access this online database.
All transactions have several copies placed in many different locations.
Without a central location, it’s extremely hard to hack or corrupt the system.
- Irreversible
Also, by using cryptography to record every transaction in chronological “blocks”, no one can alter, delete or corrupt the information once the transaction is confirmed. By design, they are irreversible.
- Transparent
Anyone can view and track down the information on the block without gaining access to someone else’s personal information.
- Trusted timestamping
By design, every transaction held on blockchain has a time and date attached to it. Making it a great platform for trustless, peer-to-peer public exchanges to be recorded without the need for intermediaries or central figures.
To be more specific, cryptocurrency is only one of the many applications that can run on the blockchain network.
Bitcoin, Ethereum and many other altcoins wouldn’t exist without the invention of Blockchain technology.
As you can see both Blockchain and cryptocurrency go hand in hand. Blockchain provides a platform for transactions to be transferred and recorded while cryptocurrencies are tokens used to send value and pay for these transactions.
Why Do You Need Cryptocurrency?
Just like traditional fiat money, cryptocurrency is a medium of exchange value that exists in the digital world. With the data encryption, all transactions are safe and secure.
The blockchain technology behind it enables you to transfer and send value to anyone in the world without going through a central bank or any third party.
You don’t have to use your credit scores or national ID and gives you a certain level of anonymity.
This way, it shows that cryptocurrency can be a great alternative form of payment to cash, credit cards, debit cards and checks.
Money can be transferred wherever across the globe securely, fast and inexpensively.
Recently, Binance, one of the most popular crypto exchanges sent $600 million worth of Bitcoin for just $7.
Compare to traditional modes of value transfer such as going through the bank, it may incur up to 20% of the total amount transferred.
Imagine how much Binance would have to pay if they use the traditional banking system? That’s a whopping $120million saved! It’s mind-blowing!
Even for small transactions, you can send money to anyone in the world without paying hefty bank fees. It’s especially helpful for frequent travelers, student abroad and digital nomads.
Also, merchants don’t have to deal with fraudulent payments or fake checks because you can only spend what you have.
Centralized vs Decentralized
You may wonder, “ Why I need to use cryptocurrency if I can transfer money using digital currency system like Paypal?”
Undeniable, Paypal provides easy and convenient ways for you to send and transfer money digitally.
But…
It’s worth mentioning that digital payment systems like Paypal are using centralized system of fiat money (USD, GBP, AUD, EUR etc).
Regardless of where you live, all fiat currencies are controlled, centralized and printed by central banks of each government.
Paypal simply provides a platform for you to send/receive fiat money and charge fees for their services. They have access to your personal information. They even have the power to ban your account without warning if you violate their terms of service.
On the contrary, cryptocurrencies like bitcoin are decentralized electronic money. With the blockchain network, every transaction is recorded and controlled by a set of mathematical algorithm.
There’s no central Bitcoin bank, organization or government.
There will be only 21 million bitcoins in the circulation. No one can print or create any more bitcoin. That’s the beauty of Bitcoin.
So, why trust people and government when you can trust math and code?
Scamcoins
Well, there are many scams, frauds, pump and dumps in the cryptospace. With many newbies fall prey to get-rich-quick schemes or crypto projects that guarantee fixed returns.
These are the altcoins invented purely to make profits for the creators.
Normally, the Scamcoin creators will pre-mined a significant amount of the altcoins, introduce them on popular crypto forums, gain community’s support, get more miners and traders for their coins.
After generating lots of buzz and driving up the value, the coin owners will sell all their altcoin, exit the market and simply let the crypto coin to fizzle out slowly without any support.
But it doesn’t mean that the whole crypto industry is a scam.
Ultimately, the market will filter these scamcoins out, only crypto coins with real use cases will stay.
The Future of Cryptocurrencies
We’re still only in the early stages of crypto.
To use the trite expression, “First they ignore us, then they laugh at use, then they fight us, then we win.” We’re still at the laughing-at-us stage. That’s quite all right, because by the time they get to fighting us, they’ve already lost. ~ Andreas Antonopoulos, The Internet of Money
Still remember those earlier days Internet was first introduced in the 90s where people laughed at it?
Just like the Internet, it might take time for cryptocurrencies and blockchain to be widely adopted.
No one knows when will Bitcoin reach mass adoption but one thing is certain: Cryptocurrency and blockchain are here to stay.
With each passing day, the technology becomes more reliable, trustworthy and secure. More and more people around the world are learning, appreciating and embracing this revolution.
Big tech companies like Microsoft, Amazon, and Facebook already looked for ways to implement blockchain technology to improve their services.
Countries like Venezuela which has been living with hyperinflation since 2014 has turned to Bitcoin, Dash and other altcoins as a store of value and medium of exchange.
Financial institutions like Goldman Sachs plan to launch a cryptocurrency trading platform. Institutional investors are also interested in cryptocurrency. But there are lots of laws and regulations concerning the virtual currencies that they’ve to deal with.
More merchants now accept Bitcoin for goods and services. The State of Ohio has officially accepted Bitcoin for paying business taxes.
For crypto enthusiast like me, the future is viewed as a borderless world, a more free society- where people have full control over their finances, where people transact directly, securely, privately with each other without the need of trusting 3rd parties.
Now it’s your turn.
What do you think about cryptocurrencies and blockchain technology?
Do you invest in Bitcoin? Why and why not?
I will share more guides and tips about crypto revolution on ThinkMaverick.
In the meantime, spend some time to educate yourself and stay safe.
Do you have any other questions? Feel free to leave a comment below.
And lastly, if you liked this post, don’t forget to Pin this!
I’ve handpicked a few guides for you to read next:
- Crypto Hardware Wallet: How to Setup a Ledger Nano S
- Crypto 101: The Ultimate List of Cryptocurrency Resource
- How to Secure Your Cryptocurrency: Cold vs Hot Wallet
- What is Bitcoin and why all the fuss with Cryptocurrency?
- What is Satoshi? Convert Satoshi to BTC, USD, EUR and other currencies
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