What is cryptocurrency? In a nutshell, it is referred to as digital currency. The allowed means of payment using a cashless system. Back in 2007 Mpesa was born here in Kenya which faced a lot of rejection where people were very skeptical that the system will fail and not get anywhere within a short time. So far it is one of the most accepted means of payment we have in the country which has drawn other parties in the pool that all run on the mobile platform. Those here in Kenya will attest that this is no new news but it is the easiest and most practical way of defining what digital currency is all about even though we still haven’t defined what entails cryptocurrency.
It first was created as a way of exchanging cash through a peer to peer network which was/is decentralized.
In a decentralized network, you don‘t have this server. So you need every single entity of the network to do this job. Every peer in the network needs to have a list with all transactions to check if future transactions are valid or an attempt to double spend.
But how can these entities keep a consensus about this records?
If the peers of the network disagree about only one single, minor balance, everything is broken. They need an absolute consensus. Usually, you take, again, a central authority to declare the correct state of balances. But how can you achieve consensus without a central authority?
Nobody did know until Satoshi emerged out of nowhere. In fact, nobody believed it was even possible.
Satoshi proved it was. His major innovation was to achieve consensus without a central authority. Cryptocurrencies are a part of this solution – the part that made the solution thrilling, fascinating and helped it to roll over the world.
Hoping there is a clearer understanding of a decentralized system which is the backbone of a cryptocurrency exchange, how then does it work? The technology of cryptography has become the backbone of the security detail behind cryptocurrency. See, above, we saw its a peer to peer network sharing meaning anyone can validate a transaction. Now, not everyone has the computing power to do this, the remaining lot are then empowered to validate every transaction from point A to point B. These lot of specified people are called miners who then release a coin.
This coin is transmitted to the receivers end and because of their effort of “mining” they get rewarded. The more they mine the fewer the coins are produced because a good cryptocurrency has a limit. This makes it “difficult” for the mining process as the miners approach the limit which means it will cost more to mine until there are no more coins left to mine. Once the coins reach a maximum level and demand grows, scarcity becomes evident which gives the mined coins more value and appreciation starts to occur. This whole digital mining and the production of coins creates what we refer to as cryptocurrency which means the currency is not controlled by governments or institutions but by people all around the world. With that definition, we can say confidently that cryptocurrency is a digital money made from code.
Cryptocurrencies are digital gold. Sound money that is secure from political influence. Money that promises to preserve and increase its value over time. Cryptocurrencies are also a fast and comfortable means of payment with a worldwide scope, and they are private and anonymous enough to serve as a means of payment for black markets and any other outlawed economic activity.
Credit goes to the very first cryptocurrency BitCoin which led to the birth of other currencies as below
Source: World Coin Index
In conclusion, cryptocurrency is here to stay. A lot of currencies come and don’t really pick as they go for a few months and go under. however, it is one and currently the only way where investors are sure that their money is not under any influence by banks and other institutions. A cryptocurrency mined stays within the current market value. Once out its out which makes it owned by the owner wherever he/she is in the world where we can say in a light note it’s like putting your money under a virtual mattress where it stays there forever just appreciating.
Soon this will be a way to trade all over the world which is an excellent platform to invest in where every merchant should allow the exchange of this currency. Next, we shall look into blockchain and what it is all about. In the mean time keep a keen eye on SWISSCOIN. The new cryptocurrency that is taking the world by a storm. More details soon but in the meantime, if you want to join the move I invite you via https://swisscoin.eu/paulkadi and I will be happy to take you through this wonderful journey.