First, hate to disappoint but cryptocurrency is not alien. What is cryptocurrency or cryptos then? In this era of digitalisation, it will come as no surprise that money too, has gone digital. Cryptocurrency is described as digital or virtual money. It uses cryptography, which is a process that converts information into an almost unhackable code. This is in turn used to track ‘over the net’ purchases and transfers. The Blockchain is a digital ledger where all the transactions and purchase information is stored. Cryptography is not easy to counterfeit as it has many security features making it the most suitable system for digital cash. As opposed to what the name suggests, the coins are not physical but only exist in virtual space/ cyberspace. The ‘coins’ are produced through a process called mining and are controlled by supply and demand. Cryptos have revolutionised the world of money, and how we see it and have numerous benefits for funds transfers worldwide.
History Of Cryptocurrency
When cryptocurrencies first entered the world of finance it elicited mixed reactions from the world and especially government and financial institutions, reactions ranging from full-blown panic attacks and fear to fascination and admiration. What is cryptocurrency and where does it fit in, in today’s economy? When Satoshi Nakamoto ‘accidentally’ invented Bitcoin, his intention was not to create a currency but a ‘peer to peer’ based cash system. The first cryptocurrency – Bitcoin, was the side product of this invention. With Bitcoin’s success came an interest and a race to develop new digital cash. Names like Namecoin, Litecoin, PPCoin, Ethereum are now mentioned in the same breath as Bitcoin, having entered the crypto market as competitors and fast-growing recognised brands.
Satoshi Nakamoto had started out with the intention to invent a decentralized cash system. Many people had for years tried and failed to make digital cash before then. Satoshi’s success is the foundation of all cryptocurrencies in the market today and Bitcoin is the most successful and best known of its kind (Pretty neat for a guy who did intend to make digital cash). Currently, all cryptos run on the Bitcoin system. Many upcoming cryptocurrency companies have made innovations and improvements to their systems to improve and set themselves apart from the competition. Since the accidental conception of cryptocurrency, it has grown and evolved. Now with more security features added to the initial system it a little harder to trace transactions.
Benefit And Drawbacks Of Cryptocurrency
The most obvious benefits of cryptocurrency are:- the ease at which funds can be transferred between two parties.Fund’s transfers are faster and made possible with minimum processing fees, unlike with institutions like banks and other financial companies that charge hefty fees for wire transfers. Another great feature and the reason why so many are switching to digital currency is the privacy that the digital money system provides. Some systems now provide the user with anonymity, to make their purchases and transactions untraceable, both to the government and other users off the mainframe blockchain. That, is what is cryptocurrency gives its users, freedom and versatility. With more sectors beginning to accept cryptos as payment for goods and services, the list of uses of cryptocurrency grows daily.
Drawbacks of many cryptocurrencies that still use the unmodified original Blockchain system is that it does not offer the user anonymity or the secrecy that users of cryptocurrency want. The blockchain is the original system that Bitcoin and many other cryptos use. It has had the misfortune of being targeted and hacked by people interested in information stored in it. All transactions are recorded and stored on the Blockchain. Anyone with knowledge to access it can get information on users, trace or tamper with transactions that may be awaiting confirmation. This is another big concern among users of some cryptocurrencies, the delay in confirmation and the possibility of tampering has slowed down the acceptance of cryptos as an alternative to cash. Moreover, in the recent months banking and financial institutions and even more so governments have stepped up the efforts to ban and frustrate digital money. This has left users and potential investors of cryptocurrency unsure and feeling insecure about the future of cryptocurrencies.
One Last Thought On Cryptocurrency
From all the buzz about cryptos, they are most likely here to stay for a long while. Navigating the new uncharted waters of digital money may be perilous. With information and knowledge, it will get easier to understand over time. Cryptocurrency gives its users, anonymity. It is especially popular in the black market arena and has thus gained a bad reputation. It is often associated with the ‘underworld, black market and unsavoury characters’ and activities such as money laundering, tax evasion and an array of colourful illegal activities. In spite of all the negative press that cryptocurrencies have got in the last quarter of the year 2017, the developers and innovators of digital money are ever improving on the initial system. With more innovation and further development and digital cash might just be the monetary medium that everyone will use or will be required to use in the not so far future. But whether cryptos take over the world or not is a Wait, Watch and See. But, one undeniable truth about cryptocurrencies is:- they have altered the Global Financial System, forever!