What is Cryptocurrency? Its History, Benefits, Future, and More
02 December 2022cryptocurrency
Summary: Cryptocurrencies have grown increasingly popular in recent years, with more than 12,000+ cryptocurrencies currently available. The number is continuously increasing. As a result, there has been an upsurge in crypto investments, but there is more to cryptocurrency that you may not be aware of. Here's our take on it.
In this blog:
- What is Cryptocurrency?
- History of Cryptocurrency
- Federal Currency vs. Cryptocurrency
- Benefits of Cryptocurrency
- Understanding Cryptograph
- Cryptography in Transactions
- Uses of Cryptography
- Future of Cryptocurrency
Whether you’re interested in investing in cryptocurrency or you just want to keep up with the latest crypto trends, this blog explains all that you need to know about cryptocurrency and is sure to get you off to a good start.
What is Cryptocurrency?
The term “cryptocurrency” is derived from the cryptography that is used to secure the transactions and control new units being created. Cryptocurrencies are decentralized, which denotes that they aren't governed by any government or financial institution.
The first cryptocurrency created in 2009 was Bitcoin which was invented by an anonymous person or group of people under the name Satoshi Nakamoto. Since then, numerous other cryptocurrencies have been created. These are often called altcoins, as a blend of alternative coins. It is accepted by businesses all over the world, including Microsoft, Expedia, and Overstock.
- Little to no transaction costs
- No limits on buying, selling, and withdrawals
- Anyone is free to use it
- All-year-round access to money
History of Cryptocurrency
People in the caveman era utilized barter, in which items and services are swapped between two or more individuals. For example, someone might trade seven apples for seven oranges. Because it had several major flaws, the barter system fell out of favor.
- People's needs must be identical—if you have something to trade, someone else must desire it, and you must desire what the other person has to offer.
- There is no standard way to attribute value—you must choose how many of your items you are willing to trade for other things, and not all items may be split. You can't, for example, break a live animal down into smaller pieces.
- The currency cannot be readily transported, unlike our current money, which may be kept in a wallet or stored on a phone.
When the barter system proved to be ineffective, the currency went through a few transformations. In 110 B.C., authorized money was produced; in A.D. 1250, gold-plated florins were created and circulated throughout Europe; and from 1600 to 1900, paper money became prevalent and is still in use today. This is how modern cash emerged.
Coins, paper currency, credit/debit cards, and digital wallets are all forms of modern money. Banks and governments regulate all of it; there is a central regulatory body that regulates how paper money and credit cards operate.
Federal Currency vs. Cryptocurrency
Consider the scenario of sending money to a friend's bank account in order to repay him or her for lunch. There are several ways this might go wrong, including;
- Your account or that of your friend may get hacked—for example, there could be a denial-of-service scenario or identity theft.
- Your and that of your friend's account could have exceeded the transfer limits.
- There's one nodal point of failure- The Bank.
This is why cryptocurrencies have the ability to revolutionize money in the future. Consider a bitcoin transaction made between two individuals. A message appears on both of their phones asking if they're sure they want to send bitcoins. If the transaction is accepted, the system verifies the user's identification, determines whether he or she has enough money to complete it, and so on. After that, the payment is transferred, and the funds are received by the recipient's account. Everything happens quickly in a few minutes.
Cryptocurrency eliminates the difficulties of today's banking system: You may transfer any amount of money, and your accounts are secure, with no single point of failure. As of now, over 10,000+ active cryptocurrencies exist, including Bitcoin, Ethereum, Litecoin, and Zcash. Every other day a new cryptocurrency surfaces. There's a great possibility that there will be many more to emerge, given the growth they're experiencing at the moment!
Benefits of Cryptocurrency
The cost of a cryptocurrency transaction is quite low—unlike, for example, the cost of sending money from a digital wallet to a bank account. Purchases and withdrawals are unrestricted, and you may complete transactions at any time of the day or night. Anyone may utilize cryptocurrency, unlike the process of establishing a bank account, which necessitates documentation and other paperwork.
- It is very secure.
- Its transactions cannot be tampered with or reversed.
- It is decentralized, which means that no single authority controls it.
- It is global, which means that it can be used by anyone in the world.
- It is fast and efficient.
- It is private. Transactions are not linked to your personal identity.
- It is anonymous. You can send and receive cryptocurrency without revealing your identity.
As mentioned earlier, cryptocurrency uses Cryptography to secure the transactions. Let’s understand about in detail. Cryptography is a technique of encrypting and decrypting data in order to protect.
Cryptology is a field of study in computers and mathematics that focuses on the application of cryptography to solve problems. Cryptology, a branch of cryptography, uses computational methods (e.g. SHA-256), which is Bitcoin's hashing algorithm; a public key, which is like a user's digital identification that everyone has access to; and a private key, which is similar to a user's digital signature that must be kept secret.
Cryptography in Transactions
The public key of the receiver is employed by the sender to encrypt the message in a cryptocurrency transaction. The message is then sent over the internet. The receiver uses his/her own private key for decrypting the message. It all happens in a matter of seconds, and it's very secure.
There are two types of cryptography.
Symmetric-key cryptography, also called secret-key cryptography: Both sender and receiver share the same secret key. Data Encryption Standard (DES) is an example of symmetric-key cryptography that was once popular but has now been deprecated because it is not secure enough. Advanced Encryption Standard (AES) is a more recent symmetric-key cryptography standard that is much more secure.
Asymmetric-key cryptography: It uses a pair of keys—a public key and a private key—for encryption and decryption. The public key can be known by everyone, but the private key must be kept secret. RSA (Rivest-Shamir-Adleman) is the most popular asymmetric-key algorithm.
Uses of Cryptography
Cryptography is used in cryptocurrency transactions to ensure security. The sender uses the receiver's public key to encrypt the message and then sends it over the internet. The receiver uses his or her private key to decrypt the message.
The use of cryptography makes cryptocurrencies very secure. Cryptocurrency transactions cannot be tampered with or reversed. This is because each transaction is verified by the network of computers that maintain the blockchain, and each computer has a copy of the blockchain. If someone tries to change a transaction, all the other computers will know about it and will reject the change.
Cryptography is also used to store your cryptocurrency in a wallet. A wallet is like a bank account for your cryptocurrency. It has a public key, which is like your account number, and a private key, which is like your PIN. When you want to send cryptocurrency to someone, you use their public key to encrypt the transaction. Only the owner of the wallet with the matching private key can decrypt the transaction and access the cryptocurrency.
Future of Cryptocurrency
When it comes to cryptocurrencies, the world is clearly divided. Supporters believe that cryptocurrencies are superior to federal money while a few oppose it.
In the future, there will be a struggle between legislation and anonymity. Because several cryptocurrencies have been linked to unlawful activities, governments would want to control how they operate. On the other hand, one of the primary goals of Bitcoin is to protect user privacy.
Futurists anticipate that by the year 2030, cryptocurrencies will have 25% of national currencies and will account for a major percentage of world trade. It's becoming more popular among merchants and customers, which means it will continue to be volatile. Because it has a volatile nature, prices will continue to fluctuate as they have been for the previous several years.
That concludes our take on cryptocurrency.
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