Cryptocurrency – What is it?

Let’s start by looking at the word Cryptography.

This is the use of codes, words, pictures and formulae, to communicate messages so that only those people that the message is intended for, can receive it in an understandable way. The message is “hidden”.

This system of communication is what is used with computers.

“Crypt” means “hidden” in Greek and “graphy” means “writing”.

The original cryptography dates back to the Egyptian practice of hieroglyphics.

The objective of this system is confidentiality of the message, just like whispering into someone’s  ear. The message only gets to the intended party.

This is what the “crypto” stands for in cryptocurrency. Currency is easy, as we all know it is money. This is why cryptocurrency is referred to as “electronic money”.

The whole intention of cryptocurrency is to enable payments without using our current systems. Without using the “middleman”. Cryptocurrency can be sent directly between two people without passing through any organisation such as a bank.

It is a new money “system”.

The main concept of cryptocurrency is that the system is decentralised. There are no banks involved. No one organisation or country controls the system. It is controlled by all the individual participants in the system. These are the different computers that are connected via the internet. Imagine a massive spider web stretching around the world with each computer being an end point of the web.

The crytpocurrencies are stored on many computers around the world with all the same data on each computer, so that if the data on one computer changes then all the other computers must change as well in order to match the other computers, otherwise the system will reject this piece of data and remove it from the system.

So how did this all start?

In 2009 someone still remaining unidentified, known as Satoshi Nakamoto created the first Bitcoin (BTC). Only six months later did it get its first value of 14 cents. In 2010 the first transaction using bitcoin occurred, when two pizzas were bought for 10 000 BTC.

In 2011 Forbes magazine  published a story about this “new currency” and the value shot up to $9.00

Over the years many other cryptocurrency coins have been created,some of them just being for entertainment purposes and others having more serious real use cases, but they all use the same “crypto” system.

The most common way that most people have come into contact with cryptocurrency is from an investment perspective. ie buy a coin and wait for its value to appreciate and then sell it to make a profit. This was not the original intention of the new money but it has developed like that. Remember that the main objective is for it to be used as  “money”.

This new system is at the beginning stages of development so eventually it will develop to become a universally accepted means of “money” Many people in this space believe that eventually banks will disappear one day.