So I’m sure you’ve already heard about cryptocurrencies. Online currencies that allow people to pay for anything in the world without “real cash” like the Dollar or Euro, seems like science fiction.
But it’s not.
So what is it exactly? Is is a scheme to get money from you? And how does it work?
Was there a need to create something new?
Crytocurrencies are mainly meant to allow you to receive, store and send something (like money) without any third parties (like banks or PayPal) between the exchange. You can send money directly to your best friend without banks taking part of that exchange.
These companies were necessary because only they could verify that the person sending money, actually had money to spend.
But what are the advantages of not using banks or credit card companies? Well, they are slow, expensive and they spend billions on infrastructures, executives, all funded by your fees, and they are part of a flawed financial system.
Who made Bitcoin?
So, back in 2008, a mysterious person calling himself Satoshi Nakamoto invented the first cryptocurrency, Bitcoin.
No one knows yet who Satoshi Nakamoto is but Bitcoin has grown a lot since its invention and remains the most popular cryptocurrency.
bitcoin.org was registered in August 2008 and in January 2009 the first bitcoin was issued.
Bitcoin solves the Double-Spending problem.
Double-spending is a potential flaw in a digital cash where the same digital token would be used more than once just by “Copy and Pasting” tokens causing all kinds of problems including inflation.
Bitcoin makes all accounts and transactions public, hiding your private details like your name. Since account balances are public, it’s easy to spot if someone used the same money twice. Once bitcoin is sent, it’s publicly added to the receiver’s account so there can’t be more than one of the same token.
Not needing a third party to handle all the money, faster and cheaper transactions and better privacy are just some of the huge benefits of cryptocurrencies!
Sounds cool right? But that’s not all!
Bitcoin’s solution for the Double’Spending problem can be applied to more than transferring money.
Since Bitcoin, new cryptocurrencies were created based on Satoshi’s original idea. New
cryptocurrencies focus on different industries which benefit from removing a third party middleman.
Removing middlemen and their fees – that’s the crypto’s main focus. Changing the way we use apps, cloud storage, digital records, contracts and so much more!
We are just at the tip of the iceberg!
So what is Cryptocurrency?
Cryptocurrencies can be used by anyone, anywhere in the world. No dollars, Euros or Yen involved – cryptocurrencies are global.
There are no physical cryptocurrencies, it’s always 100% digital! Now your computer and your phone hold all your money. This allows faster, cheaper and more secure transactions wherever and whenever you are.
Traditional exchanges (like money) are controlled by banks and governments making them “centralized.”
Most cryptocurrencies are not controlled or regulated by any single entity making them “decentralized.”
But then how is it controlled?
Bitcoin, for example, is completely controlled by its users all over the world using the internet to send and receive payments. But again, unlike traditional payments, Bitcoin uses peer-to-peer technology to operate with no central authority: managing transactions and issuing money are carried out collectively by the network.
Bitcoin is an open-source project. This means that it’s core code is available for anyone to see and create something a bit different from it.
Take a look if you’re curious: Bitcoin source code
Most popular Cryptocurrencies
Some of the most popular cryptocurrencies include Ethereum, Litecoin, IOTA , NEO, Monero, and Ripple. There are a lot more, and some are just meant so scam people. When a new crypto emerges, there’s really no way of telling how long will it be around making, so if you’re thinking about buying a new coin make sure you know exactly what it’s for, how it works and it’s plans for the future. Do not buy something that’s not trustworthy.
Ethereum goal is to remove the middlemen from digital applications. Instead of using
Google’s or Apple’s stores, you can buy apps directly through a decentralized community. Ethereum uses super reliable programs that run without any unexpected behavior, downtime or interference – they’re called “Smart Contracts.”
Using Ethereum you can trust that if you sell something and the other person get’s the package, you get paid.
Ripple’s goal is also to remove transfers middlemen. The difference it’s that it possible to pay any bitcoin user straight from a Ripple account without ever needing to hold any of the digital currency. You can send Euros and the other party can receive dollars.
Litecoin was created in October 2011, like many others it’s code is a “fork” of bitcoin’s and it’s actually supposed to be about four times faster!
China’s first cryptocurrency is called NEO. Other cryptocurrencies, NEO can be used for a lot of different applications. Including removing middlemen from online payments, voting, insurance or digital file storage. China’s1.4 billion people, might help bring out the true NEO potential.
Monero is a very, very private and secure digital currency. It’s 100% anonymous and untraceable. This of course leads to some illegal activities.
IOTA is a cryptocurrency that’s built for the Internet of Things (IoT). This refers to all internet-connected devices like your smartphone, smartwatch, and smart TV. The number of devices connected to the internet is growing every day and more and more devices will communicate between each other. IOTA could be used to send payments from your smartphone to stores with no actual people working there, no more supermarket long lines! You simply get in the store, pick what you want and leave!
These are just some of main cryptocurrencies. There are a lot more with new applications every day. Although this is still very new and a lot of people are skeptical, it has a great potencial and could actually replace completely traditional money.
There’s still a lot more to cover, but we’ll cover some more in the next post.
What are your thoughts on Cryptocurrencies? Are they the future or just something that will be crushed in a few years?
Let me know!
Next post I’ll explain How excactly Cryptocurrencies work?