Cryptocurrency, according to the Oxford dictionary, is any system of electronic money, used for buying and selling online, without the need for a central bank. It was first developed in 1998 by Wei Dai. He started thinking about developing a new payment method that uses a cryptographic system and whose main characteristic was decentralization. However, he wasn’t the creator of the most famous coin we know today: Bitcoin.
Created by someone under the alias of Satoshi Nakamoto (whose identity is still a secret) in 2009, Bitcoin is the first cryptocurrency ever made with the intention of creating a new method of payment which could be used internationally – one decentralized, without any financial institution behind it. When it first started, Bitcoin had no value at all. A user tried selling 10,000BTC for $50 in 2009 but could not find a buyer. The first true value reported is in March 2010 where 1 Bitcoin was valued at $0.003. Now, however, 1BTC is estimated to be worth around $45,471.40.
How does cryptocurrency work?
The mechanism used is known as blockchain. When the cryptocurrency finishes developing to a certain point, it is added and traded through blockchain. This adds value to the cryptocurrency. Blockchains operate via cryptography, with each block in the chain cryptographically connected to the previous one.
What is blockchain?
A blockchain is a type of database, a computer system that stores information. The advantages of it is users can simultaneously access the information at the same time. Other than this, it is efficient to use for large data sets. A blockchain holds sets of information in blocks and ‘chains’ them together, thus becoming a blockchain. New information would be added into a new block and then connected to the previous chain. It acts like a linked-list. The steps connecting cryptocurrency and blockchain are:
A new transaction gets entered
The transaction is then transmitted to a network of peer-to-peer computers scattered across the world
The network of computers then solve equations to confirm the validity of the transaction
Once confirmed to be legitimate transactions, they are clustered together into blocks
These blocks are chained together creating a long history of all transactions that are permanent. Thus, completing the transaction.
New cryptocurrencies are created everyday, so should you invest in them? Always keep in mind that cryptocurrencies are constantly changing values, which means that it’s a risky investment. Cryptocurrencies are known as the newest form of currency and may be the future. In fact, physical memory may become a distant memory as cryptocurrency becomes more widely used. Who knows where the evolution of money and technology will take us?
Written by Chanisda (Dena) Von der Luehe.
Edited by Nichapatr (Petch) Lomtakul.