Decentralized cryptocurrencies like the bitcoins provide an outlet for personal wealth beyond confiscation and restriction. In the current world, they have become a global phenomenon and one known to many people. Banks, governments and other companies have become aware of its importance, although to other people it is still a geeky, not well understood concept. With this, many major banks, governments and accounting firms have researched on them and written work on them as well.
The first cryptocurrency, the bitcoin, was the first decentralized cryptocurrency, created in 2009 by a developer Satoshi Nakamato. They emerged as a side product of another invention, his goal having being to invent something that many had failed to create before digital money. He said in his announcement of bitcoin, that he had developed “A Peer-to-Peer Electronic Cash System’.
The most important part of his invention was the fact that he found a way of building a decentralized cash system, all the other attempts from various people to create digital money before then having failed. Seeing all the other attempts fail made him try to build a digital money system, which led to the invention of cryptocurrency.
But what really are cryptocurrencies? Simply defined they are limited entries in a database that cannot be changed by anyone without them fulfilling specific conditions. Taking the money on your bank account for instance; it is no more than just entries in a database that are only changed under certain specific conditions. They are basically token explaining entries in decentralized consensus-databases and are called CRYPTOcurrencies since the process of consensus keeping is secured by strong cryptography.
They are made on cryptography and secured mathematically and not by trust or even people. Their properties include, fast and global as their transactions are almost instantly propagated and confirmed within minutes after transacting. They are also irreversible and once a cryptocurrency transaction is made it cannot be reversed. They are also secure in as, only the private key owner can send cryptocurrency since the funds are locked in a public key cryptography system, thus making a bitcoin address very secure and impossible to break the scheme.
In addition, they are permissionless since cryptocurrency is just software which can be easily downloaded by anyone for free and upon installation, one can easily send and receive bitcoins and other cryptocurrencies without need to seek consent or permission from anyone. About bitcoins, Being the most famous cryptocurrencies, Bitcoins serve as a digital gold standard in all the cryptocurrency-industry. It is used as means of payment globally, a defacto currency of cyber-crime similar to ransomware and darknet markets.
Having existed for seven years, its price value has interestingly increased from null to above 650 dollars and nearly 200,000 transactions per day. The bitcoin is with no doubt here to stay.
And how then are Bitcoins mined? It is a process in which transactions are verified and added to a public ledger called a block chain and new bitcoin is released. Anyone can do the mining provided they have internet access and suitable hardware. The mining process involves compiling of recent transactions into blocks and then trying to solve some difficult puzzles.
The participant who solves the puzzles first then gets to place the next block on the block chain and claim rewards. The rewards are meant to draw people to keep mining, and are both transaction fees associated with compiled transactions in the block and also newly released bitcoins.
The mining process is expensive, painstaking but also rewarding in some instances. It however has a magnetic draw for many investors interested in the cryptocurrencies. Why then should you mine? Mining enables you to earn cryptocurrency without putting any of your money into it. Crypto can also be obtained through buying using fiat currency, playing video games or even publishing blogs on platforms that use crypto to pay users. Apart from lining miners pockets, mining is also the only way new cryptocurrency can be released into circulation.
It is the reason Bitcoin came to be Miners get paid for working as auditors. In their work, they verify previous Bitcoin transactions. This keeps users honest and by verifying transactions, miners also help in prevention of 50 double-spending’ problem which involves illicit spending of same money twice by users.
Cryptocurrencies, owing to their revolutionary properties have become a success that even Satoshi would not have aspired to se. Even with numerous fails at other attempts to create digital cash, Bitcoin had a thing to it that has created fascination and enthusiasm among many. The cryptocurrencies are a digital gold, sound money secure from political influence and one that promises to preserve and appreciate value with time .
They are also fast and convenient means of payment globally, and a private means that can be used with anonymity when making payments like for black markets and other outlawed economic activities. But even with their increasing use as a mode for payment, its use a means of store of value or speculation dwarfs the payment aspects, as they give rise to a fast growing market for investors and speculators.
With Bitcoins still being the most used and most famous cryptocurrency, and other forms having almost zero impact, there is need to be on the look for several other forms like the Ethereum, Ripple, Litecoin and Monero and even many other forms that promise playground for testing innovations in crypto-technology. But even with their advantages to an investor such as stable growth rates, confidence of community, more liquidity of the Bitcoin compared to other cryptocurrency and the high rise in bitcoin exchange in the recent years, there is still need to be on the lookout. With the numerous cryptos existing and even new ones being created every week, there is no doubt that some are scams and Ponzi schemes.
The opportunity is immense yes,and the cryptos are not bad therefore this does not mean they shouldn’t be bought. It just means there is too much hype and scammers out there. Also, with their increasing popularity, comes likelihood of more regulation and government scrutiny, eroding the major premise for their existence.
And what then is the future for cryptocurrencies? Whereas the number of merchants accepting cryptocurrencies continues to increase, they are still very much in minority. They first have to acquire widespread reception amongst consumers and their relative complexity will deter many apart from for those who are technologically adept.
Cryptocurrencies aspiring to become portion of the conventional financial system will have to satisfy certain criteria, they would require to remain mathematically complex, so as to avoid fraud and hacking, but also easy for users to comprehend; devolved but with enough consumer protection;able to preserve anonymity of users.
With criteria to be satisfied, there is possibility, though remote, that in a few years the cryptocurrency most popular could have attributes ranging amid heavily-regulated sanction currencies and today’s cryptocurrencies. Bitcoins success in dealing with its challenges may determine fortune of upcoming cryptocurrencies in coming years.