The world we live in is changing at a rapid pace, with technology at the forefront. Although cryptocurrencies have been around for a few years, it has only really been in the major public spotlight for the last year or two.
What is a cryptocurrency?
It is a currency associated with the internet that uses cryptography, which in laymen’s terms is the process of converting legible information into an almost uncrackable code, to track purchases and transfers. Well, not the easy but you get the point. Bitcoin has been seen as a tool for private, anonymous transactions, and it’s the payment of choice for drug deals and other illegal purchases.
Cryptography was born out of the need for secure communication in the Second World War. As the world has got more advanced so has the technology especially in the digital era. Mathematical theory and computer science combined to become a way more secure form of communications information and now money online.
The first cryptocurrency was bitcoin, which was created in 2008 by Satoshi Nakamoto, a secretive internet user, and later went online in 2009. Many attempts to identify Satoshi have been made without conclusive proof so it is still a mystery as to who this crazy cat is. Since then there has been a huge rise in cryptocurrencies with more than 1,000 “coins” available on the internet at present and rising. At the end of 2017 Bitcoin hit all-time highs of $20,000 a coin, yes you read that correct $20,000 for 1 Bitcoin. Since then it crashed down to $5500 but is trying to get back on the bull run.
If you think about as a world how fast we are advancing, you would be silly not to take a look at how cryptocurrencies have a chance to revolutionize the way we transfer money and pay for things. When the internet came we had the dotcom “bubble” yet look how everything is bought and done online now.
Look at what happened to the postal service when email was invented. Look how Amazon is changing the way we buy our household goods and even gifts.
How do Cryptocurrencies work?
Cryptocurrencies use decentralized technology to let users make secure payments and store money without the need to use their name or go through a bank. They run on a distributed public ledger called blockchain, which is a record of all transactions updated and held by currency holders.
Units of cryptocurrency are created through a process called mining, which involves using computer power ( Graphics cards ) or specifically made “miners” ( Ant Miner ) to solve complicated math problems that generate coins. Users also able buy the cryptocurrencies/coins from brokers, then store and spend them using cryptographic wallets. There are wallets out there now that will also link to prepaid credit cards which allow you to receive payments in cryptocurrencies and convert to fiat money IE. USD,GBP, EUR etc.
Now although this blockchain technology is still relatively new to the markets it could be a while before other financial assets could be traded using this technology.
As a new form of cash, the cryptocurrency markets have been known to boom suddenly, meaning a small investment can become a large sum overnight. This has led many investors to the crypto world searching for the next Bitcoin. Many people were also attracted to this when Bitcoin was the talk of the world in 2017 with many crypto analysts predicting bitcoin to hit $100k a coin. Markets just do not work like that I am afraid and many people got burnt buying bitcoin at its all-time highs expecting to make thousands. The crypto markets are new and very volatile so unless you have taken the time to educate yourself on how to trade them I would advise staying away. On the flip side to that, you can make a huge sum of money if you do get involved in some good crypto trading groups or just learn yourself.