DIGITAL MONEY
JUNE 16, 2021
What Is Cryptocurrency ?
A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.
It is decentralized digital money, based on blockchain technology. The most popular version is Bitcoin. This digital payment system doesn’t rely on banks to verify transactions and not issued by any central authority. Theoretically immune to government interference or maniuplation.
“Crypto” refers to the various encryption algorithms and cryptographic techniques that safeguard these entries, such as elliptical curve encryption, public-private key pairs and hashing functions.
The most popular and most valuable blockchain-based cryptocurrency is Bitcoin which also the first. Today there are so many alternate cryptocurrencies, some of them are clones or forks of Bitcoin. Some others are new currencies built from scratch.
Bitcoin was launched in 2009 by an individual or group known by the pseudonym “Satoshi Nakamoto.” There were over 18.6 million bitcoins in circulation as of March 2021, with a total market cap of around $927 billion.
How does Bitcoin work ? Each Bitcoin is basically a computer file which is stored in a ‘digital wallet’ app on a smartphone or computer. People can send Bitcoins (or part of one) to your digital wallet, and you can send Bitcoins to other people as well. Every single transaction is recorded in a public list called the blockchain. This makes it possible to trace the history of Bitcoins to stop people from spending coins they do not own, making copies or undo-ing transactions.
There are three main ways to get Bitcoins :
- You can buy Bitcoins using the ‘real’ money
- Sell things and let people pay you with Bitcoins
- Create it using a computer.
The process of using powerful computer to create Bitcoins is called mining, thus people doing this is called miner. But it could be years before you got a single Bitcoin if you started mining now. You would end up spending more money on electricity than the Bitcoin would be worth.
One thing to consider is, this cryptocurrency system is not entirely secure. It is possible to lose your Bitcoin wallet or delete your Bitcoins and lose them forever if your computer has problem or you forgot the password for instance. There have also been thefts from websites that let you store your Bitcoins remotely.
Also, the value of Bitcoins has gone up and down over the years since it was created in 2009. Some people don’t think it’s safe to spend your ‘real’ money on Bitcoins.
This was expressed by the head of The Bank of England, Andrew Bailey, in October 2020. He said that he was “very nervous” about people using Bitcoin for payments.
Investors should realize its price is extremely volatile and they could lose a lot of money because the value could drop significantly at any moment.
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