Since the creation of Bitcoin, assumed to be the first and still the most well known cryptocurrency, the idea of digital money has been increasing in popularity in comparison to the normal system of banking. Now thousands of cryptocurrencies exist, revolutionizing the way people are investing their money!
Author: Derek LaChance
Cryptocurrency is a tradable digital asset, basically meaning it is digital money! It has no physical form and only exists in the network. Anybody may have access to crypto as long as they have an internet connection and a smart device. Crypto is financial freedom!
Instead of being physical money, crypto is stored online and exists as entries in a database. It gets its name from the cryptography it uses to authenticate transactions while providing security and safety.
Bitcoin’s creator, known as Satoshi Nakamoto, introduced the currency as “a new electronic cash system with no trusted third party.”
Similar to regular money in your account but unlike physical currency; crypto doesn’t rely on third parties to verify the value of transactions. Instead of storing your transactions in a bank, crypto transactions are recorded in a decentralized public ledger. This digital ledger is known as the blockchain which enables the existence of reliable cryptocurrencies.
The way it works:
Your bank shows a value assumed to be in your account and you request to complete a transfer. This occurs only if the bank approves the process.
What happens if the bank says no?
What happens if an error occurs with the bank's data storage?
What happens if one day the amount you hold in your bank account has somehow changed?
The blockchain - a bit of the nitty gritty!
Cryptocurrency is usually built with block chain technology, a distributed public ledger that records all transactions that take place. Although wallet addresses are anonymous, transactions are public, traceable, and permanently recorded. Meaning all members of the network have complete clarity!
Now I mentioned the blockchain is distributed and public. Imagine the transactions as individual data entries, or “blocks” of data. As each transaction occurs the data block records necessary information, such as; from who, to who, how much, and when. By a consensus on the network, these blocks form a chain of data as possessions are changed between owners.
Consensus on the network = the majority of nodes agree that the transaction is valid
The blocks confirm the exact chronological sequence of the movement of data in a permanent and secure chain of events. Each additional block in the chain strengthens the verification of the previous blocks, in turn, the entire blockchain. The data history, distributed throughout the entire network, always confirms who owns what at any time. This enables the owner of that currency to send it without the need for a bank to authorize the transaction.
When you own cryptocurrency you can move your money from one entity to another, without a third party verification. This makes buying items and transferring funds much faster and cheaper than regular banking. Improving transparency while almost eliminating transaction fees.
You say cryptocurrency is money, so what can I actually buy?
Yes, cryptocurrency is essentially worth real money and little by little cryptocurrency will become universal! One day you may be able to buy everything from a cup of coffee to your dream home. It is slowly revolutionizing the world of commerce. For now only a few cryptocurrencies, like Bitcoin, are being commercially accepted but that may change with the times. The new introduction of crypto visa and debit cards, enables to buy from a retailer that doesn’t accept crypto directly.
That being said, there are many institutions currently accepting crypto with more expected to follow suit in the near future. It is already possible to buy a variety of products from luxury watches to cars through certain websites and dealerships.
Who knows, maybe one day you may be able to use cryptocurrency to pay for your university education. Imagine paying for an international MBA program with digital money instantly, without extra fees from the bank! That could be the future of education.
Cryptocurrency is changing slowly changing the way of banking across the world. In the future companies including hotels will add crypto to their currencies.
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