Everything You Need to Know About Cryptocurrencies
Cryptocurrencies are digital money. The first – Bitcoin – was invented in 2008 by Satoshi Nakamoto. Cryptocurrencies are decentralized, peer-to-peer electronic cash systems. If “decentralized” and “peer-to-peer” sound familiar to you, that’s because the Internet is exactly the same kind of network. Prior attempts at digital cash as far back as the 1990s had failed due to lack of a trusted central authority. With a peer-to-peer system there is no central authority – hence no one to trust (or not). Instead, every node on the network contains all the information regarding all historical transactions and account balances.
This balance and transaction history is known as blockchain. Once a transaction is confirmed (by a credentialed individual known as a miner) it becomes part of the historical record and can never be changed.
What makes cryptocurrencies so appealing?
Cryptocurrencies have many attractive properties – too many, in fact, to recount in detail here. Suffice to say they are:
No one needs to know your true identity
They’re virtual – use them anywhere
Only the holder of a cryptocurrency’s private key can spend that currency
Most cryptocurrencies have a limit on the quantity to be created
“Digital gold” – and better than the real thing
Cryptocurrencies have been referred to as “digital gold,” mostly because unlike traditional currencies, they are not controlled by a government (governments, of course, are known to use currency manipulation to achieve political ends). This makes them popular for a variety of transactions.
Even greater than their utility for transactions is their attractiveness as investment vehicles. Many markets exist for cryptocurrency transactions and their daily trade volume now exceeds that of some stock exchanges.
Some of the better known cryptocurrencies include:
The granddaddy of cryptocurrencies is coming up on its tenth birthday. There are more than 200,000 Bitcoin transactions daily. The Winkelvoss brothers (you saw them in the Facebook movie) are enthusiasts and claim to hold 1% of the world ’s existing Bitcoin supply.
Probably the second-best known cryptocurrency (technically, a platform for cryptocurrencies). Due to how it is constructed, Ethereum is especially useful for settling “smart” contracts.
The cryptocurrency that cryptocurrency aficionados love to hate, Ripple’s strength is its network for processing IOUs.
Has a lighter codebase than Bitcoin, meaning it processes faster.
Has become popular for black market transactions due to its anonymity features.