Cryptocurrency is a digital form of money that is designed with emphasis on financial security and the cash lite concept.
This currency is associated with the internet that uses cryptography – the process of converting legible information into an uncrackable code, to track purchases and transfers.
This was created mainly with the drive to secure communication during World War 2. It has evolved in the digital era with elements of computer science to secure communications, information and money online.
The first cryptocurrency was bitcoin, created in 2009 and is still the top alternative. There has been a general increase in cryptocurrencies in the past years and are now more than 900 available on the internet.
How do cryptocurrencies work?
Cryptocurrencies use decentralised technology to enable users make secure payments and store money without the need to use their name or go through banks. They run on a blockchain system which records all transactions updated and held by currency holders.
Units of cryptocurrency are created through a process called mining, which involves using computer power to solve complicated maths queries that generate coins which are then bought from brokers, stored and spent using cryptographic wallets.
The most common cryptocurrencies?
- Bitcoin: the most commonly traded cryptocurrency to date. The currency was developed by Satoshi Nakamoto in 2009 and has a market capitalisation of around $45 billion as of July 2017.
- Ethereum: Developed in 2015, the second most popular and valuable cryptocurrency with a market capitalisation of around $18bn as of July 2017. However, ethereum has had a turbulent journey. After a major hack in 2016 ; it split into two currencies, while its value has in recent months reached as high as $400 but crashed briefly to as low as 10 cents.
- Ripple: Ripple was founded in 2012. Ripple can be used to track more kinds of transactions, not just of the cryptocurrency nature. It has been used by banks including Santander and UBS and has a market capitalisation of around $6.3 billion.
- Litecoin: This currency is most similar in form to bitcoin, but has moved more quickly to develop new innovations, including faster payments and processes to allow many more transactions. The total value of all Litecoin is around $2.1 billion.
Why use a cryptocurrency?
Cryptocurrencies are known for being secure and providing anonymity. Transactions in them cannot be faked or reversed and have low fees, making it more reliable than conventional currency.
Their decentralised nature means they are available to everyone unlike banks that can be exclusive in who they will let open accounts.
As a new form of cash, the cryptocurrency markets have been known to take off meaning a small investment can become a large sum over night.
However, it is important to note
But the same works the other way. People look to invest in cryptocurrencies should be aware of the volatility of the market and the risks they take when buying.
Because of the level of anonymity they offer, cryptocurrencies are often associated with illegal activity, particularly on the dark web. Users should be careful about the connotations when choosing to buy the currencies.
Cryptocurrency for you, payment advancements worldwide.