Cryptocurrencies have become such a success that I’m sure even the inventor – Satoshi Nakamoto – didn’t dare to dream about. There were many past attempts to create a digital cash system that is decentralized but never before has the idea been able to attract so many followers. There is just something about Bitcoin, Litecoin, Etherium, and all the other cryptocurrencies that provokes unprecedented enthusiasm and fascination. Sometimes it comes off as a religion rather than technology!
However, looking past all the buzz and press releases, you’ll be surprised to know that a majority of individuals (even scientists, consultants, and bankers) have very limited knowledge on digital currencies and the underlying blockchain technology.
Here’s what you need to know about digital currencies
A cryptocurrency is a virtual currency that uses cryptography and works across a P2P network, making it difficult to counterfeit. Perhaps its most defining feature is the fact that it is not issued or controlled by any central authority, making it resistant to government manipulation.
A much simpler way of looking at cryptocurrencies is in the form of limited entries in a database that no one can alter without passing certain conditions.
Let’s dive deeper and look at the mechanism controlling the database of digital currencies. A cryptocurrency such as Bitcoin works across a network of peers. Every computer on the network is called a block. Every peer has an immutable record of all the previous transactions and the balances in every account.
Every transaction must be signed by two parties before it is confirmed by use of a basic public key cryptography. Once it has been signed, the transaction is broadcasted across the network using basic p2p technology. Nothing complicated.
The transaction completes almost instantaneously and is known by the whole network. One more thing, only miners have the power to confirm transactions. Miners are simply powerful computers tasked with stamping the transaction as legit before spreading it on the network as well as creating valid bitcoins.
So, why all this buzz about this money systems? Here are the characteristics of digital money that make it so alluring:
1. Irreversible transactions
No transaction can be reversed after confirmation. If you chose to send money, you send it, and that’s it. This is especially handy in the sense that it helps merchants to avoid fraud through chargebacks.
Neither accounts nor transactions are linked to true identities. It’s all pseudonymous. While it is possible to examine the flow of transactions, it is impossible to link it to the real world identity of the bearer of the address.
Since the transactions occur on a global blockchain network, they can work anywhere so long as you are connected to the internet.
4. Fast and cost-efficient
Because there is no central clearing authority, digital currencies are transmitted much faster than a typical bank would. The exact time it takes to complete a transaction will depend on the digital currency that you are working with, but still, it beats the banking system.
The public key cryptography system ensures that only you (the holder of the private key) can send the cryptocurrency.
Now that you know how Bitcoin works, let’s look at other related developments that you might want to know about.
Bitcoin IRA is a relatively new concept that helps individuals to set up a retirement account. Also, if you already have an IRA, you can transfer the funds and change it into cryptocurrency. If you choose this type of IRA, you get to enjoy minimal fees and possibly have your investment grow because cryptocurrencies are becoming more valuable with each passing day.
Bitcoin teller machines
BitAccess is among the very first bitcoin teller machines that we got. It tries to make cryptocurrencies more accessible by allowing you to deposit cash and get a digital wallet with the equivalent in bitcoin, as well as put cryptocurrency in and receive conventional money. How cool is that!
Presently, Bitcoin is expanding into lending. Companies are emerging to offer this service after addressing the legal framework. For instance, Bitbond and Kiva. These companies help entrepreneurs from all over the world gain access to microfinance.
Money transfers and payments
Bitcoin is going on to prove to us that banks are a thing of the past by being able to handle money just the same way as your bank does. The only difference is that transferring cryptocurrencies is much cheaper and faster.
Even developing countries are already embracing the idea. Kenyans, for example, have BitPesa which works almost the same way as Western Union. Users in Kenya, Uganda, Tanzania, and Nigeria can receive cryptocurrencies via wire transfer and then convert them into local currencies via mobile money platforms.
Another example of an innovative digital currency payment platform is CashU. It was developed for people to pay their bills without the need for a bank account or credit card. It also enables consumers in developing countries to shop online.
Getting excited yet? Here are a few examples of cryptocurrencies that you might want to try (other than Bitcoin):
1. Litecoin (LTC)
This digital cash system launched in 2011 and was among the first cryptocurrencies after Bitcoin. As of October 5th, 2018, it had a total market capitalization of $3.4 billion and $58.09 per token value.
2. Ethereum (ETH)
Etherium became active in 2015. It enables Smart Contracts and Distributed Applications (DApps) to be created and run without fraud, downtime, or interference from third parties. Ether has a market cap of $22.97 billion and per token value of $224.42.
3. Zcash (ZEC)
Zcash was created in late 2016 and aims to provide extra security/privacy by keeping the details of the sender and recipient as well as the amount private. Its market cap is at about $633.64 million and the value per token is $128.08.
4. Monero (XMR)
Monero is a secure, private, and untraceable open-source cryptocurrency. Monero puts a major emphasis on decentralization, scalability, and privacy by using a unique technique called “ring signatures.” Monero has a market capitalization of over two billion US dollars and per token value of $142.21.
5. Ripple (XRP)
Launched in 2012, Ripple is a real-time global settlement network which enables, instant, sure, and low-cost international payments. Its structure does not require mining, and this reduces the amount of computing power that it requires. Their market capitalization as of October stood at $20.07 billion and per token value at $0.518.
Now, these are just but a few of the popular cryptocurrencies out there. For more information on Blockchain technology, BitFortune has been kind enough to put together a meticulous infographic detailing industries that are benefiting from blockchain as well as current and future trends.