August 28, 2019
What is a cryptocurrency?
A cryptocurrency is a digital representation of something valuable, such as money,
that only exists online. Cryptocurrencies use cryptography to verify and secure transactions and are seen by many as the foundation of a better future economy.
But what’s wrong with how we pay for things now?
In a few words, it is too centralized. Every purchase that we make needs to be approved by a third party for which they all charge a fee, adding up to a considerable amount of money over time. Transactions can also be extremely slow, it can sometimes take days for a bank to guarantee that a payment has been received.
Another issue is that these companies need to store endless amounts of personal data about their customers to work out who is trustworthy, but they can’t always be trusted to keep that information safe. If we don’t use a centralized source of information, how do we prove that we have paid when we buy something,or that we can afford to pay for it in the first place? Solving this issue is one of the greatest achievements of the first cryptocurrency ever created, Bitcoin. Bitcoin uses a peer to peer payment network, where the responsibility to maintain a trusted ledger of transactions is shared between everyone, rather than one central body.
And, as there is no central authority needed, there are no disproportionate fees or personal data at risk of being compromised.
So, Bitcoin is a cryptocurrency that solves the issue of payment,
but what else can cryptocurrencies do?
Since 2008 countless cryptocurrencies have been created many of them carrying out different functions in different blockchain ecosystems. Investors buy into them because they believe in the product that the currency underpins.
Many people see cryptocurrencies as tools that can help developing countries
by reducing fees, offer greater access to banking, help combat inflation and fight corruption. Only time will tell if they change the world so drastically, but one thing is for certain, the blockchain technology that they are built on is here to stay…