Why were cryptocurrencies created?
The first Bitcoin transaction took place in 2009 when Hal Finney bought pizza for 10,000 bitcoins. That’s equivalent to $110,000,000 USD at $11,000 per BTC, crazy right? Yes, welcome to the world of crypto.
Cryptocurrency is encrypted virtual or digital money, which is new to the financial world and has found its way to being used as a medium of exchange. The new digital currency is based on the block chain feature. It uses cryptography which ensures transactions are secured and verified.
Cryptography controls the creation of new units of a particular cryptocurrency. Crypto is mainly decentralized, which means it is transferred between peers and only confirmed in a public ledger through a process known as mining.
The cryptographic financial system is built on a peer-to-peer, open source, decentralized network. The currency is not controlled by any one person or organization, and their specifications are not easily altered without consensus on the network.
In centralized financial systems, governments and banks control the supply of money, which is the printed form currency unit. Unlike cryptocurrencies, the currencies supplied and controlled by the centralised systems are often prone to inflation. Cryptocurrencies such as bitcoin have a limited supply, which means they are produced at a predetermined, set rate.
Cryptocurrencies are not limited within any country’s boundaries. You can send and receive money anywhere in the world at any given time. The fees involved in sending and receiving are lower compared to using other controlled systems such as the western union. Using them as a means of payment allows you to operate freely, without any worry about formal permissions, banking hours or any other limitations. It also protects your identity from theft by fraudsters because payments can be completed without any requirement to tie your personal information to the transactions. It also protects business people from fraudsters as the payments made through the virtual currencies are irreversible and secure. The most widely used and transferred cryptocurrency is bitcoin.
What is a Bitcoin?
Bitcoin was the first cryptocurrency to be introduced back in 2009, just after the 2008 financial crisis. Bitcoin was created through the blockchain architecture with the aim to eliminate intermediaries and avoid unnecessary transactional charges. It is controlled by blockchain, which is Bitcoin’s distributed ledger. With tens of thousands of programmers and entrepreneurs around the world developing new services and apps relating to it, bitcoin is the most popular digital currency. Just like other cryptocurrencies, it is not controlled by any single government or central bank. Bitcoin transactions are censorship resistant. This means that no one, including banks, or governments, can block you from sending or receiving bitcoins.
Bitcoin has been widely accepted by business people and consumers over time. It is considered very safe compared to other digital currencies because its code is peer-reviewed by a large community of developers. The fact that it was the first virtual currency to implement the blockchain technology successfully and the lack of third parties has made it to attract the large open source developer community.
At present, most countries around the world allow bitcoin as a payment method. The ruling in Europe to remove VAT on cryptocurrencies and the launching of bitcoin futures on CBOE (Chicago Board Options Exchange) and CME (Contracts Markets Exchange Group) has also helped to enhance the popularity and value of the currency.
Governments around the world are exploring ways to regulate and legalise this currency because most citizens are already immersed in it. Many companies are also accepting bitcoin as a method of payment. Bitcoin is now accepted by a wide variety of businesses, from restaurants and coffee shops, to real estate companies and online shops among many others.
Bitcoin is highly valued and has a higher demand since in most cases it’s a gateway to buying most of the alternative cryptocurrencies. The altcoins, which are other cryptocurrencies alternatives to bitcoin, are fast gaining popularity and this translates to a higher demand of the bitcoin which is used to buy them.
The Past, Present, and Future
The Bitcoin network came into existence on January 3, 2009, with the release of the first Bitcoin software and the issuance of the first bitcoins. It was created by an anonymous person or group who called themselves Satoshi Nakamoto. Nakamoto published the invention on October 31, 2008, to the Cryptography Mailing list called metzdowd.com. The research paper was called “Bitcoin: A Peer-to-Peer Electronic Cash System”. It was implemented in its first client and released to the open source community in January 2009. Satoshi Nakamoto continued to collaborate with other developers on the bitcoin software until mid-2010. Around this time, he handed over control of the source code repository to the bitcoin developer Gavin Andresen. Nakamoto also transferred several related domains to various prominent members of the bitcoin community, and then stopped his involvement in the project. Prior to his absence and handover, Satoshi Nakamoto made all modifications to the source code.
At first, the initial exchange rates for Bitcoin were set by individuals on online forums. The first “famous” transaction was the infamous 10,000 bitcoin pizza purchase, worth around 20 million USD eight years later. Today, however, most bitcoin exchanges are made through online trading platforms. In 2013, several mainstream websites began accepting bitcoin. WordPress started in November 2012, followed by OKCupid in 2013. In 2014 several major vendors started to accept bitcoin, including TigerDirect, Overstock.com, Expedia, Dell, and Microsoft.
The future of the digital currency is highly promising and the potential is still huge. Many of the apps, upgrades, and protocols that will make riper ready for common use are still being developed. We are just in the initial stage as more than half of the bitcoins have not been mined yet. Compare the bitcoin whose value swings up and down with most of the fiat currencies which lose value every year due to inflation. With bitcoin’s transactional volume increasing every day, a cap on supply, and an on-going reduction in bitcoins produced, the value of bitcoin is destined to grow immensely.