The last few years have seen a new player emerge on the currency market, actually hundreds of new players. Not since the emergence of The Euro way back in 1999 have we seen a significant new currency. Cryptocurrencies are digital currencies created with a clever method of encryption using a technology known as a blockchain.
The first cryptocurrency emerged back in 2008 and is known as Bitcoin; it remains the most prominent and famous of all crypto brands. In addition to Bitcoin, there are thousands of followers and imitators on the market today. The choice is overwhelmingly in favor of the consumer. Here we will look at what cryptocurrency is and what the main uses for it are.
Table of Contents
As we already mentioned, the original cryptocurrency is Bitcoin, and it first emerged in 2008 but didn’t fully get going until several years later. But we can trace back the beginnings of the technology to years before this.
The invention of blockchain is attributed to a person or collective known as Satoshi Nakamoto, but there is little to identify this person. But much like any other development, much of its success is built on earlier encryption work, most prominently Stuart Haber and W. Scott Stornetta worked on encryption methods using a chain of blocks as early as the 1990s.
What Are They?
We can see that Bitcoin and every subsequent cryptocurrency relies on the security provided by blockchain technology. This security is provided by encryption created when users ‘mine’ for coins, users solve complicated mathematical equations using computing software and hardware, and this provides the basis for the blocks in the ledger chain. This chain keeps a virtually unhackable record of all transactions on the network.
We now have a currency that is completely independent of any bank or nation-state. It is virtually unhackable and secret from scrutiny by the government or tax offices. We can see why this can be desirable for many uses such as international finance, keeping assets hidden, and alternative payment methods.
How Many Are There?
It’s difficult to pin down the exact number of cryptocurrencies at any one time as new ones appear all the time, and some fail but even those that fail don’t completely disappear, the value deteriorates to a level that makes them pretty much worthless. Even with this in mind, it is estimated that there are between 3,000 and 4,000 active cryptocurrencies currently active. Some of these are extremely volatile in value and can be a risky prospect to use.
Talking of price volatility, which on the face of it seems a bad thing isn’t always the case. Price swings can be beneficial to investors if they read things well and time their investments wisely. Even more established cryptocurrencies are not as stable as traditional currencies.
We are all familiar with the stories of the Bitcoin rise in value between summer 2020 and today. But the same coin suffered a drop back in 2017 when many start-up ventures relied on Bitcoin too much. When deciding if a cryptocurrency investment is s good idea you need to be bold and get a little luck, as these markets are notoriously difficult to predict.
As it’s a currency it is used in the same way as others, to buy things. When cryptocurrency first became a thing, the only places you could spend it were on a niche section of tech and alternative websites, and the dark web especially. The link between early cryptocurrencies, such as Bitcoin and the dark web led many to assume there was something criminal about using Bitcoin. While it’s true that some criminal activity did use crypto, it was unfair to let this become a defining feature.
Over time the image and acceptability of using cryptocurrencies found a way into the mainstream. To the extent that we are seeing recognizable brands beginning to accept them, Microsoft, Tesla, Burger, and Starbucks are amongst those. For consumers, it is easier than ever how to buy Ethereum in Canada or any other cryptocurrency for that matter.
Secrecy is a major draw with cryptocurrency, and one of the reasons that early-on many assumed that if you were looking to hide your financial transactions, there must be something dodgy going on. But this is not necessarily true, as there are many perfectly reasonable reasons people may desire some privacy in their dealings. It could be to keep certain aspects of a business’s finances from the tax authorities, or it could be for personal reasons, such as not letting partners or family know of wealth that they mean to be secret.
The secrecy that encapsulates the major selling point of cryptocurrency, can also be used for many other applications in the modern world. Data sharing is a prime example of where such bombproof encryption can be useful. Tracking items in a supply chain can be greatly helped by a blockchain-backed system.
Perhaps where the security of sensitive data is a must: perfect examples of this would be with military use. Or to keep medical data secure when transferring it between facilities. We can even see how blockchain can help make the democratic process more robust; electronic voting systems can be secured this way.
When we see how much media attention that cryptocurrency is generating these days, it is no wonder that big businesses are looking at ways of getting in on it. For many, it’s as simple as accepting existing currencies as payment, Bitcoin being the most common example. But many large firms are looking at the possibility of creating their own cryptocurrency to be used with their brand.
It is unclear how these are to be used in the real world, but we can see how many retailers already operate store card accounts with a credit facility; so it may be an extension of that system. Those reportedly working on new cryptocurrencies include Facebook, Walmart, and Amazon and it will be interesting to see if they take off.