Let us start by asking a very basic question.
What is a cryptocurrency?
We can simply say that, it is a form of digital money. It can be sent to anyone anywhere in the world, it can be used to buy anything. It sounds simple and similar to PayPal right?, but there’s more to it.
Traditional online payment gateways such as PayPal, Visa and MasterCard are centralised organisations. They are controlled by single or a group of organisations. They keep our money with them and we need to ask them to transfer on our behalf for any purpose.
Now coming to cryptocurrencies, there is no single or a group of organisations that control our funds. Each of us can act as a bank ourselves to send and receive funds. It is usually done by using a open source software. Our phones and computers communicate directly with each other, which eliminates the requirement of a middleman.
The word Cryptocurrency is the combination of cryptography and currency. Cryptography is used to secure our funds and to avoid duplicate transactions.
Why should we care, when there are lot’s of apps for conducting transactions?
We should, for the following reasons:
- It’s permissionless: no one can stop our access to funds and prevent our transactions.
- It’s resistant to censorship: impossible for state and non-state actors to shutdown the network.
- Cheap and fast payment method: do we know how much international transfers cost? we can send and receive cryptocurrency at a fraction of that cost and within seconds.
What is that Bitcoin everyone around us keeps talking about?
It’s the earliest and the most popular cryptocurrency.
Who invented Bitcoin?
Actually, nobody knows. The anonymous group Satoshi Nakamoto, published the white paper in 2008 and the software was released in 2009.
Essentially, Bitcoin provided the framework for many cryptocurrencies that followed it. Not all cryptocurrencies are same, some are faster than others, some are more private and some are even programmable.
In the next article, we shall talk about blockchain technology, upon which most cryptocurrencies are built.
Before investing your money into a particular project, make sure you DO YOUR OWN RESEARCH.
Disclaimer: The article is intended for informational purposes only and should not be considered as investment advice. All the prices and data referenced in this article were recorded on Jun 1, 2021.
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