What is a cryptocurrency?
Cryptocurrency is a direct response to a failed monetary system. The humans of this world got tired and did what they usually do when they get tired of a seemingly unprofitable situation. They became creative, fashioned out a way to be more in control of their finances and participate more in the financial systems; this gave birth to this era of cryptocurrencies- digital currencies (or simply virtual money/ digital payment system) based on a decentralized (inclusive participation) system.
In simple terms, a crypto is a “digital money”; this already means that you cannot have it in tangible form like how you have the Kenyan shilling, Nigerian naira, Canadian dollars and all other legal tenders in several parts of the world. As a matter of fact, everything you do with it is currently online, perhaps till the status quo changes-who knows. Now this digital money- crypto is secured by cryptography. In simple terms, cryptography is a system of “protecting information and communications through the use of codes, so that only those for whom the information is intended can read and process it”. Essentially, cryptography ensures that no human or vacuum can counterfeit or double spend the same crypto unit. What is more, cryptocurrencies ensure transparency and are built on immutable records.
Although the governments of this world are increasingly interested in creating their own crypto coins thereby exploring a more centralized version of cryptocurrencies (Central Bank Digital Currencies), many cryptocurrencies are largely decentralized, being based on distributed (all inclusive) systems known as blockchain technology. What this means is that, oops, central authorities like the government have no direct control or power to interfere in the crypto system- at least theoretically. What is more, with cryptocurrencies, it is a partial begone to traditional banks and middlemen generally. You can say crypto births a democratic monetary system if you wish.
What is the Buzz About Cryptos?
Asides from being an easy way out of the inflationary effects of government’s cheap quantitative easing (impulsive and continuous printing of money by governments whenever their backs are against a wall), the advent of cryptocurrencies poses a revolution to the monetary policy as run by the governments of our present world. All the features of cryptocurrencies as explained below are paradigm shifting forces on the traditional financial systems. No government can up and bar humans from using cryptos although many governments have tried. You cannot stop a person from accepting BTC as a payment. No sole or central agency can maneuver the supply of crypto coins. Most cryptos are limited in supply and this in turn has a positive bearing on the value of the cryptos.
There is no way I will be going all the way to the cradle of crypto and I will not mention Satoshi Nakamoto. Nakamoto is the inventor of the first and most popular cryptocurrency at the moment- bitcoin. To be honest, it is not yet known who exactly Satoshi is. Although the genius announced that his intention was not to invent the payment system that bitcoin now is. What he really intended to invent was “a new electronic cash system that uses a peer-to-peer network to prevent double-spending. It’s completely decentralized with no server or central authority.” – Satoshi Nakamoto, on SourceForge on the 9th of January 2009. In an email to Dustin Tramell, the widely celebrated inventor explained how he successfully achieved the dreams of his forerunners by creating a non-trust-based money system. He noted: “… after more than a decade of failed Trusted Third Party based systems (Digicash, etc.), they see it as a lost cause. I hope they can make the distinction, that this is the first time I know of that we’re trying a non-trust-based system.”
Examples of Cryptocurrencies
Currently, the crypto space boasts of over 4000 cryptocurrencies all over the world. Some common examples are: Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Monero (XMR). The second set of cryptocurrencies run centrally. This set is known as Central Bank Digital Currencies. The latter is a result of governments the world over dabbling into the crypto space and creating their own cryptocurrencies. Examples are the Chinese digital yuan, Sweden’s e-krona, and the Marshall Islands’ sovereign (sov).
Features of Crypto
The following attributes differentiate cryptocurrencies from extant means of exchange:
1. Secure and Encrypted:
Cryptos are kept in digital wallets- more like a public address cryptography system. Digital Wallets are accessible via private keys held by the owner. It is almost impossible for others to break into a digital wallet unless of course fraudulent individuals are privy of the private key.
2. Irreversible and Permanent: A crypto on-chain action cannot be recalled or withdrawn. This means that once crypto units are sent, you cannot unsend them. Oops. This of course has advantages, but you can already imagine the disadvantages. While all records will be easily traceable due to their permanence, on the flipside it becomes highly unfortunate for an unknowing person to send crypto funds to a scammer. He cannot resort to a central system to freeze the scammer’s account and have the sums reversed.
3. Anonymous Transactions: The use of cryptos allow for anonymous and pseudonymous monetary transactions. This is the purport of privacy coins.
4. Global: BTC is fast becoming a cross jurisdiction and global payment system as it continues to go mainstream. It runs on networks that are indifferent to the user’s physical address.
5. Free entry and exit: There are no central doorkeepers who restrict the entry and exit of crypto users. All you must do is download a crypto enabling App. Get familiar with it and show off.