Cryptocurrency: A 21st century miracle.

What is a cryptocurrency?

In our modern times, with the rise of e-commerce and the evolution of electronic transactions, digital assets were born. This kind of asset consists of anything digital with the right to use. Basically, a cryptocurrency is a form of digital asset, created as a medium of exchange, a trading instrument. Digital coins are stored in a computerized database and powerful cryptography is used to ensure safe transactions, to control the supply, and verify ownership.

In contrast with the “normal” digital currency, which is issued by central banks, a cryptocurrency does not fall under a central authority. The decentralized control is one of the main characteristics of crypto, with every cryptocurrency working through a distributed ledger, or a blockchain (the register that records crypto transactions) as it is called, which functions as an economic transaction database.

How it all started?

The first form of cryptocurrency was created in 1983 by David Chaum, an American cryptographer who called his newly created electronic money: ecash. Some years later he managed to make his digital currency untraceable by any form of central authority, including banks, governments, etc. Also, as time went by, more digital currency systems appeared. Cases like b-money, bitgold, and others, developed the digital landscape and paved the way for the creation of the most famous digital asset, Bitcoin.

So, what is Bitcoin?

Basically, Bitcoin is the first decentralized cryptocurrency, created in 2008 by a developer with the alias: Satoshi Nakamoto. Moreover, some even believe that Nakamoto is not a person, but a group of people or even a computer collective of the financial sector in Europe.

As mentioned before Bitcoin is a decentralized cryptocurrency, but the need for a mechanism that would confirm all the transactions still existed. For that reason, a procedure -that included the contribution of many computers around the world- was born, this procedure is called mining. Every ten minutes new bitcoins are created and given as a reward to users that contribute to the confirmation mentioned above, the so-called miners.

What about numbers?

It is worth mentioning that Bitcoin’s value has grown tremendously over the years, highlighting an increase of 438.55% over the period of the last 6 months. Practically, Bitcoin is responsible for the capitalization of more than 1 trillion USD (United States Dollars). Of course, these numbers and bitcoin’s speculative nature were enough for hundreds of investors to try this new form of currency. Today, after many upgrades, 1 Bitcoin equals 58.708,40 dollars.

Pros

Apparently, the most important characteristic of Bitcoin is its non-central nature, making it independent of a single source. That means sustainability and viability. Above that, its nature makes it a democratic tool, as every change has to be voted by its users and of course, privacy and transparency are also included. Every transaction is highlighted and it is available for anyone to see, an account’s previous transactions are visible from users but no one can know the person behind this account because Bitcoin values anonymity. Besides, its electronic nature means that Bitcoins are portable and their possession does not mean high costs of maintenance.

What about the future?

The future though, may not be so bright about Bitcoin and other cryptocurrencies (Ethereum, Litecoin, Cardano, etc). Taking into consideration all the noise around cryptos, it was normal and expected for the banking sector to make its move. Around 86% of Central Banks have already initiated the procedures for issuing their own digital currency (CBDC). This will reduce the demand for cryptocurrencies and cash as well. Moreover, governments have tightened the regulatory framework of the market, leading cryptocurrency demand to further decrease.

At the same time, Bitcoin’s alterability makes it a non-practical wealth stock and a too complex tool to be used as a payment mechanism. For that reason, Bitcoin is considered a high-risk currency, unlike the stability and no-risk nature that a Bank and therefore, a Central Bank Digital Currency can offer. So, investors are expected to turn to a more stable version of a digital asset and abandon Bitcoin and every other cryptocurrency.

Final Words

In conclusion, people value cryptocurrencies because of their democratic, rebellious and profitable nature but at the same time, others point out the dangers that this privacy can include. More conservative views believe that cryptocurrencies are the perfect medium of exchange for illegal activities and that can be considered true. On the other hand, others mention Einstein’s work on nuclear energy and its later use for military purposes. With the same logic, cryptocurrency’s nature is not malicious but can be used by bad people. It is obvious that digital assets influence the financial sector, but it is also obvious that this influence expands to a more social frame as well.