The word cryptocurrency triggers mixed responses from various people. For some, it captures the imagination. For others, it strikes fear. And for the overwhelming majority, it spells deep confusion. Attempts to create a digital currency in the 90s proved futile and many gave up. It was not until 2009 when Satoshi Nakamoto (inventor of Bitcoin) established xmrwallet.com an elaborate peer based network system to manage digital currency. This system also effectively solved the problem of double spending that is typical to that of centralized financial systems.
What does cryptocurrency really mean?
Put into simple terms, cryptocurrency is a medium of making transactions that use block chain technology to manage the financial database. The network isn’t managed by any central authority and operates on a peer-to-peer premise. In a typical block chain, when a user commences a transaction, the request is broadcast to the p2p network. Applying in built algorithms, the computers unanimously authenticate the transaction and the status of the user who puts in the request. After authentication, the transaction is combined with other transactions to form a block. This block is then added to an existing block chain in a manner that 7makes it incorruptible.
Properties of cryptocurrency
- Cryptocurrency transactions are irreversible. Once a transaction has been made, there is backward route. Remember, there is no central authority to appeal to reverse a transaction.
- The personal identity of users is masked behind an alias referred to as an address. An individual’s address has no link whatsoever to the real world.
- Cryptocurrency is immune tosanctions. Everyone is at liberty to access, download and install cryptocurrency software such as the Monero wallet and make transactions. Again, recall there is no controlling authority.
- Cryptocurrency is extremely fast and available on a global scale. Transactions are instantly propagated across the network and authenticated in just a few moments. Transactions do not depend on your geographical location. Someone in Prague can easily engage in a transaction with someone in Peru.
- Cryptocurrency security is unmatched. Each user has a private key used to initiate transactions. The key is like a user’s signature. No transaction can be made without this key. Could it mean that this makes cryptocurrency more secure than Gitmo?
- The supply of cryptocurrency is regulated. A default algorithm gradually decreases the supply of crypto tokens.
Even though cryptocurrency gives us a secure, irreversible and anonymous way of making transactions, it greatly undermines a country’s monetary policy. Interventions by governments to control inflation, deflation and devaluation of currency are, therefore, hindered. Central banks can no longer effectively regulate the circulation of money.
Cryptocurrency is gradually revolutionizing world trade. It is even being used by some as a contingency to escape devaluation of their domestic currency. Private corporations are gradually embracing the technology. On the other hand,governments are viewing it as a threat since it undermines their control and authority. With cryptocurrency tipped to gain massive traction in the near future, we are all bound to witness its revolutionary effect on the order of world commerce.