What are Cryptocurrencies?

For some people, cryptocurrencies are simply alternative currencies with different uses, while for others, they are a long-term investment. And, while cryptocurrencies have been becoming more and more popular and are used for a variety of online applications, many people still don’t fully understand what they are.

The Concept Behind Cryptocurrency

Just as their name implies, cryptocurrencies are currencies that have been encrypted and the very first cryptocurrency was created in 2009 by a man known as Satoshi Nakamoto. These digital currencies work much like regular currency, however, unlike traditional forms of money, cryptocurrency don’t have any physical form and are not managed by any centralized systems such as a bank or nation. Furthermore, the fact that they are encrypted makes it so that all cryptocurrencies can be bought and sold with a certain level of anonymity.

Their value is determined by the laws of supply and demand and they are mostly exchanged via exchange platforms or through brokers for other cryptocurrencies (For example, trading Bitcoin against the Monero) or other fiat currencies such as the Euro or US Dollar.

Cryptocurrency and the Blockchain

The anonymity of trading cryptocurrencies comes from the underlying technology, that functions as a sort of security system, known as the Blockchain. Essentially, the Blockchain is a registry which contains information about every exchange ever made using it.

Furthermore, anyone with access to the internet is able to view the log, however, it is completely impossible for anyone to falsify or modify any of it. Therefore, it’s important to keep your user code safe when you’re in possession of any type of cryptocurrency.

The system is held together by a network of its user’s computers and every transaction is verified by not only one single centralized computer, but by every computer that is part of the network. It should also be mentioned that although transaction records are always available to the public, there are some, such as the Dash, whose transaction logs are practically unreadable. Therefore, these complex cryptocurrencies offer a greater level of anonymity to their users.

The History of Cryptocurrency

The story starts back in 2009 during the global financial crisis with the appearance of Bitcoin as a solution to economic and financial conjecture. Since then, countless other cryptocurrencies have been created such as Ethereum, Dash, Litecoin, Zcash and Bitcoin Cash (A derivative of Bitcoin’s Blockchain).

In the beginning, Bitcoin struggled to see its value maintain the $1 mark. However, within only a few months, it saw its value skyrocket up to $1,000. This unprecedented growth has continued through the years into 2017, when it’s value peaked at around $20,000 USD in December.

The most important thing to understand about cryptocurrencies, other than their underlying Blockchain technology, is that encrypted currencies function based on the same principles as the stock market. Therefore, to create a cryptocurrency, one must first determine the maximum number of coins or tokens that will be put into circulation. Then, the value of the cryptocurrency can be determined by the total number of its users.