Cryptocurrency: The Future of Digital Money
Money used to be bank notes and coins. In today’s world, cash continues to be gradually replaced by digital money, providing consumers with more convenience and choice, and businesses with lower transactions costs and no chargebacks.
What is Cryptocurrency?
The easiest way to define Cryptocurrency is that it’s a digital currency that uses encryption to provide its users with complete security and privacy, whilst allowing them to buy and sell goods and services like traditional currency. The difference is that transactions are made directly through users without needing to go through traditional bank or credit card providers. The banking system is altogether removed in favour of a network of secure user computers called “the blockchain.”
Unlike traditional forms of money, there is no physical cash, no coins not even credit cards, everything lives and breathes digitally online.
How do Cryptocurrencies Work?
Traditional currencies such as the US Dollar and the UK pound are issued by individual governments and regulated by their central banks. The control and issuing of new money lie with the central controlling entity making this a ‘Centralized’ system.
Cryptocurrencies on the other hand are not controlled by any single entity. There are no banks or governments involved, making this a decentralized system and what makes cryptocurrency so powerful.
Whereas traditional currency is transferred from bank to bank through credit cards or bank transfers, cryptocurrencies are transferred online directly from person to person and validated through technology called “The Blockchain”.
Blockchain is the technology at the foundation of all cryptocurrencies. Quite simply, the blockchain is a public ledger of all the transactions that take place on the network. This technology allows anyone to send, receive and validate any and all transactions that take place. Each currency usually has its own blockchain network, however there are a certain few that can share a blockchain network.
Why Use Cryptocurrencies?
- Low Fees – Compared to traditional bank transfers, which incur extremely high fees, cryptocurrencies have extremely low fees.
- Security – Your cryptocurrency is kept permanently on the blockchain and to get access you need your personal encryption key which is a seed phrase known only to you. With no centralized system it is extremely difficult for hackers or thieves to even remotely gain access to your funds.
- Ownership – Whilst your bank deposits are being used by the bank to fund their own investments and leaving you open to risk, your cryptocurrency is your own and nobody has the ability to use it but you.
- Privacy – Cryptocurrencies give complete privacy to users as there is no centralized entity processing the transactions. Instead the transactions are sent directly between users. Though blockchain technology keeps a public record, the record is scrambled numbers due to encryption with no personal details attached.
- Accessibility – Cryptocurrency can be accessed by anybody with an internet connection as opposed to needing to go directly to a bank to open an account and use their services. This frees up access to a lot of less developed countries that potentially would not have had prior access.
Where are Cryptocurrencies Stored?
Unlike traditional currency, where your cash and coins need to be stored, cryptocurrency is completely digital, leaving you with many different options to play with when deciding how to store it. When you buy cryptocurrency, you receive a private digital key that gives you access to those funds. This key can be stored online through exchanges and third-party apps, as well as offline through a hardware wallet on a USB and even a QR code can be created for you to print and store securely.
How to Buy Cryptocurrency?
If you’ve read this far, you might be tempted to dip your toes into the thrilling world of cryptocurrency and wondering where you can start. There are a multitude of options that are available and it’s a lot easier than you might think.
There are several exchanges where you can purchase your crypto from directly, such as Upbit, HitBTC, CoinBene and Bittrex. The exchanges are used by both novices as well as experts to gain access to cryptocurrencies.
Brokers provide access to crypto for anyone who wants to invest or trade in cryptocurrencies. Brokers do all the executing for you and usually charge either a percentage of the transaction or a flat fee.
The PumaPay platform can be used to convert PMA tokens to cryptocurrency. If you’re lucky enough to have access to PMA, you can exchange it for both Bitcoin and even Ether.
Over the Counter trading is cryptocurrency trading that takes place away from digital currency exchanges. Favored by many large-scale traders, OTC trades are often placed by hedge funds, private wealth managers or high-net-worth individuals.
Who sets Cryptocurrency Prices?
Like any stock that is initially launched, its price is set from the currency launcher, be that $1 or $1000. From this point on, the price of the currency will forever fluctuate according to supply and demand. The more demand there is for the coin, the higher the price will be.
Which are the Most Popular Cryptocurrencies?
In an industry that has only existed for 10 years, there are now over 2,500 cryptocurrencies to choose from. Of these, there are a handful that stand out.
The world’s first cryptocurrency and market leader by a long way, is Bitcoin. Due to its large community base, established reputation and security, Bitcoin’s name has become synonymous with cryptocurrency. It has the highest value of any coin and receives significant media coverage. According to coinmarketcap.com 55.69% of the total crypto market, is held by Bitcoin.
If Bitcoin is the king of Cryptocurrency, Ethereum is the prince, waiting for their time to rule. As opposed to Bitcoin, Ethereum was designed to help companies deploy applications on the blockchain. The underlying currency, called Ether, acts as the fuel that powers these applications. A great achievement for Ethereum was that it allows for the introduction of ‘smart contracts’ for the first time on the blockchain.
Litecoin was launched in 2012 as a ‘lite’ version of Bitcoin. Its core advantages are that it supports much faster payments and far more transactions per second than bitcoin, making it a more suitable option for handling payment transactions.
Ripple is a digital currency designed to allow financial institutions to make global payments more easily and cheaply. To meet the demand of these institutions, their technology also focuses on transaction volume and can handle about 200 times more transactions per second than Bitcoin can.
Why do Cryptocurrencies Exist?
During the financial crisis of 2008, with the global closures of banks and businesses, leaving trust at an all-time low, the domain name of “bitcoin.org” was registered anonymously. Soon thereafter a whitepaper was released detailing what bitcoin was, how it worked and how the double spend problem was solved. Most importantly, it detailed how it worked on a decentralized model and removed banking systems all-together. The whitepaper was signed with the pseudonym of “Satoshi Nakamoto”. Not long thereafter the first cryptocurrency transaction took place, and the rest, as they say, is history.
To this day, it is not known who Satoshi Nakamoto is. However, it is rumoured that Satoshi Nakamoto has over 1 million bitcoins in their possession. This would give them a current value of over 7 billion dollars.