Introduction To Cryptocurrency

The word cryptocurrency may seem new for some, especially if you are still gathering your bearings by using ATM cards to shop online, pay bills online, transfer funds via a bank app, and even get an online loan by just filling out a personal information form with no collateral.

2009 recorded a new system of currency named cryptocurrency (a digital currency). Cryptos are used, and stored within a software, but share the same properties as cash currency which is valued, and in demand, although highly volatile.

The buzz of “cryptocurrency” started with bitcoin in 2009, as the first-ever digital currency. Presently, digital currency is a familiar topic to users of the internet but a fair number of users are yet to understand cryptocurrency and how it works.

We live in a rapidly growing technology era and the evolution of digital transactions has started. In this article, we will understand:

• What is cryptocurrency

• A brief history of cryptocurrency

• What technology powers cryptocurrency

• Types of cryptocurrency and uses

• Importance of cryptocurrency and

• Advantages of cryptocurrency

What is Cryptocurrency

Simply put: Cryptocurrency is a digital currency in form of a coin that works as a medium of exchange through a computer network, transactions are verified and records are maintained by a decentralized system using cryptography and are not reliant on centralized authority such as a government or bank in a country.

That is cryptocurrency can be used to buy goods, pay for services, convert cash to crypto coins that can be saved as assets, and much more.

Key Takeaway:

• Cryptocurrency is a digital-only currency

• Cryptocurrency is not controlled by a central authority

• Every cryptocurrency is managed and maintained by a decentralized technology

A brief history of Cryptocurrency

The history of cryptocurrency is dated far back to 1983 when American cryptographer David Chaum conceived cryptographic electronic money called ecash.

While the first decentralized cryptocurrency was created in 2009 by Satoshi Nakamoto who designed the first usable blockchain and cryptocurrency called Bitcoin in 2009 and was released as open-source software. This creation opened a new path for blockchain technology.

Key Takeaway:

• The first decentralized cryptocurrency was created in 2009 by Satoshi Nakamoto

• Bitcoin was the first decentralized cryptocurrency

• Cryptocurrency is built on Blockchain

What Technology Powers Cryptocurrency

Remember we said, “transactions are verified and records are maintained by a decentralized system using cryptography”? That decentralized technology is called Blockchain where all cryptocurrencies are built on.

Blockchain technology is a decentralized, distributed ledger that stores and records digital assets. When a piece of information or data is stored on the blockchain, it cannot be changed or modified, this makes blockchain a transparent technology for payments, and other financial transactions.

Although blockchain technology is relatively new, it has made it possible for people to legitimately save, send and receive coins with a little transaction fee, and easily convert cash to coins or vice versa with transparent and secure exchange merchants.

Key Takeaway:

• Blockchain is the engine of all cryptocurrency

• Blockchain is a decentralized technology that stores and records digital assets

• Recorded data in blockchain can't be modified

• The nature of blockchain makes crypto transactions secure and transparent.

Types of Cryptocurrency and Uses

The different types of cryptocurrency depend on how they are formulated, with regard to their use case, and application. There are about five which include:

1. Utility Tokens: This type of crypto provides access to platform services like goods in the city you reside. Examples are Brickblock, Timicoin, and Golem. They are used as utility tokens and can be traded.

2. Security Tokens: These are designed for security measures and their issuance is governed by financial regulation. Examples are Bcap, Sia Funds, and Science Blockchain. They are used as security native tokens.

3. Payment Tokens: Are used to make payments for goods and services inside and outside payment platforms. Almost all crypto falls into this category. Monero, Ethereum, and Bitcoin.

4. Exchange Tokens: Are used within exchange platforms and are known as native tokens of the platform. Examples are KuCoin Token, Uni token, HT for Huobi exchange, Binance Coin, or BNB token.

5. Non-Fungible Tokens(NFT): Last but not the least, NFTs are cryptocurrencies with limited issuance that have unique identities and make them hard to copy or replicate. Examples are digital artworks and in-game items.

Importance of Cryptocurrency

The impact of crypto on the economy has grown over the years, making it more important to central and decentralized businesses. With the use of blockchain technology, cryptocurrency has redefined transaction systems and reduced financial security risks, stamp out fraud, and is maintaining transparency in a scalable method.

There is no intermediary required for the exchange of cryptocurrencies which leads to speed in transactions. Since there are no intermediaries, transaction costs are lower. Lower transaction cost implies efficiency in exchange and an increase in the volume of transactions. Fixed costs are lower due to the non-requirement of wages, rent expenses, or utility bills. Lastly, no geographical barriers to cryptocurrencies like centralized agencies to monitor transactions.

Advantages of cryptocurrency

You will agree with me that cryptocurrency is changing the traditional method we are used to by harnessing the bogus potentials of blockchain technology. This brings us to the advantages of crypto.

1. The decentralized nature of cryptocurrency helps to keep the currency free of monopoly, and enables the coin value to be stable, grow, and secure for transactions, unlike fiat currency which is controlled by the government.

2. Cryptocurrency is Self-governed and managed. This means the government is not a factor in crypto development, rather transactions are stored by developers/miners on their hardware and are rewarded a fee for doing so. This encourages miners to keep accurate and up-to-date records of the cryptocurrency with integrity.

3. Protection from Inflation of cryptocurrency. Every cryptocurrency has a fixed amount from when they are released. The idea is to reduce inflation by demand. There were 21 million Bitcoin released in 2009, and as the demand for it increases, its value increases to keep up with the market and prevent inflation.

4. Cryptocurrency provides a Secure and Private transaction system without third parties like VISA cards. The blockchain ledger which is based on mathematical puzzles is hard to decode making it difficult to change data, steal or destroy it.

5. Cryptocurrency exchanges are done easily with little time, making it the fastest way to transfer funds. Most cryptocurrencies can be bought using different currencies like naira, euro, dollar, and other country currencies with the help of crypto exchanges, a currency can be converted into another and transferred from one wallet to another with little or zero charges.

Conclusion

Cryptocurrency is changing how we do things on the internet. While a lot has been put in place to enable financial security and freedom, cryptocurrency is still evolving, although a good number of businesses and national authorities are rapidly adopting cryptocurrency as it has proven to be the best method of transaction. It is alright to share what you learned from this topic, don't hesitate to drop them in that rectangular box, it looks like the comments section! see you in the next blog post.