What is Cryptocurrency ?
Cryptocurrency is a kind of digital money with which transactions are carried out. It uses cryptography to secure transactions. The difference between digital currency ( Cryptocurrency) and physical currency( Fiat Money) is that Fiat Money is centralized meanwhile digital money is decentralized. Transactions via Fiat Money are highly controlled by the banks and governments. People always pass through a third party which entails additional cost whereas cryptocurrencies are built on a decentralized peer to peer open source network. No organization controls the currency. In order to acquire this currency you need a wallet or Cryptocurrency wallet. A cryptocurrency wallet is a software program where you can store and exchange units of the currency. It is protected by a password and Wallet ID. Examples of Cryptocurrency wallets include : blockchain.info,
One good thing about cryptocurrencies is that it enables you to send and receive money anywhere in the world. You don’t have to worry about standing for hours on long queues in banks and MFIs (Micro Finance Institutions) and pay high transaction fees to either send or receive money.
The Evolution of Cryptocurrency
The first cryptocurrency, bit gold, was created in 1998 by a certain Nick Szabo. Like bitcoin and other cryptocurrencies that would follow it, bit gold (not to be confused with the later gold-based exchange, BitGold) was an electronic currency system which required users to complete a proof of work function with solutions being cryptographically put together and published. A currency system based on a reusable proof of work was later created by Hal Finney who followed Szabo’s work.
The first decentralized cryptocurrency, bitcoin, was created in 2009 by pseudonymous software developer Satoshi Nakamoto. It used SHA-256, a cryptographic hash function, as its proof-of-work scheme. In April 2011, Namecoin was created as an attempt at forming a decentralized DNS, which would make internet censorship very difficult. Soon after, in October 2011, Litecoin was released. It was the first successful cryptocurrency to use scrypt as its hash function instead of SHA-256. Another notable cryptocurrency, Peercoin was the first to use a proof-of-work/proof-of-stake hybrid. IOTA was the first cryptocurrency not based on a blockchain, and instead uses the Tangle. Many other cryptocurrencies have been created though few have been successful, as they have brought little in the aspect of technical innovation.
Advantages of Cryptocurrencies
- They are decentralized.
- Their value increases over time.
- Cryptocurrency transactions are instantaneous.
- International transfer of Cryptocurrency is free of charge.
Disadvantages of Cryptocurrencies
- Conventional currencies are protected by the law while cryptocurrencies are not . Therefore if they are stolen or lost they can’t be recovered.
- Cryptocurrency transactions are irreversible
- Many people aren’t aware of it
- Cryptocurrencies is not very secured as your wallet can be hacked into if you are not vigilant.
On 6 August 2014, the UK announced its Treasury had been commissioned to do a study of cryptocurrencies, and what role, if any, they can play in the UK economy. The study was also to report on whether regulation should be.
It is said that Cryptocurrency has come to offset the banking system. The speed at which it is growing is amazing. Most cryptocurrencies are designed to gradually decrease production of currency, placing an ultimate cap on the total amount of currency that will ever be in circulation, mimicking precious metals. Compared with ordinary currencies held by financial institutions or kept as cash on hand, cryptocurrencies can be more difficult for seizure by law enforcement.
Cryptocurrency is the currency of the future. Few people use it but its rapidly growing in popularity but however, it could take time for it to be accepted worldwide. Who knows may be Cryptocurrency might replace Fiat Money.
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Rinelle & Paul