Cryptocurrencies, which are spearheaded by Bitcoin, have captured the financial world by storm. Unfortunately, most of the mainstream articles attempting to conceptualise this new financial instrument are full of inaccurate information and bias that takes away from the real effectiveness of cryptocurrencies.
Cryptocurrency is a term that encompasses all the digital mediums of exchange that implement a cryptographic framework as well as security features. Simply put, cryptocurrencies are protected by technology which makes it impossible to expand the money supply beyond the predetermined algorithmic rate that the public knows about. Like real-world precious metals, cryptocurrency algorithms have a maximum limit beyond which no more of that currency can be produced.
Cryptocurrencies are completely “cloud-based”, which means that they don’t exist in physical form but only a virtual/digital value. Bitcoin was the first cryptocurrency to be created. If you buy Bitcoin, you must have a virtual Bitcoin wallet that synchronises Bitcoin transactions with the Bitcoin database automatically. Users constantly host the transaction log just as torrents are peer hosted, which makes it almost impossible for authorities to crack down upon. The synchronisation allows all the transactions that happen through one Bitcoin wallet to be logged automatically on the hosted transaction log and cryptography used to protect it. It is possible to send money between wallets instantly and each transaction has a private key, which is a secret code that allows users to prove Bitcoin ownership.
A few important points to note here include:
- It is impossible to modify the roof limit of a cryptocurrency once its public code has been made public.
- Transfers from one wallet to the next are almost instantaneous.
- All that you need to claim your cryptocurrency is to memorise your private key or note it on a physical piece of paper. This helps to eliminate the risk of cryptocurrency theft through computer hacks.
- The source code is full proof and cryptocurrency theft usually happens once hackers get access to the private keys stored on the computers of users. It is comparable to an actual bank robbery and isn’t an inherent cryptography problem.
Over one thousand cryptocurrencies are currently in existence, most of them taking Bitcoin’s original source code and making adjustments. However, only a few of these are accepted by retailers as a payment method. The top three cryptocurrencies in terms of acceptability are Bitcoin, Litecoin, and Peercoin, which are regarded as being more “stable” because their scripts are quickly nearing their mine limit with miners processing the mines 24/7 using uninterruptable batteries from the UPS Battery Shop.
It is thus hardly surprising that Bitcoin price fluctuations generally drive faith in the rest of the cryptocurrencies. Since Bitcoin was launched back in 2009, its price has risen from below $1 to over $8,000 (at the time of writing). Recently, holding cryptocurrency for speculative purposes instead of an actual currency has become quite attractive to financially savvy individuals. Cryptocurrencies don’t have any “anchor” or government backing them up and the only foundation that they have is people’s faith in their value. Simply put, the market mechanism solely determines cryptocurrency prices. At the time of writing, that faith is worth $8,000 a Bitcoin and this does not come from its intrinsic value but rather what users can do with it.
The relative nascence of cryptocurrency coupled with the unprecedented rise in their popularity has led to an applicable lag in legislation and people have reaped numerous benefits. Whether it is buying drugs online, performing arbitrage, trading cryptocurrency on an exchange, or simply moving money across borders and avoiding the numerous transactional and administrative costs involved. 60 per cent of all Bitcoin activity takes place on Satoshi Dicer, which is a gambling platform. People would like to use their own currency, but they also want an effective, quick, and anonymous way to make profits and payments internationally.