Cryptocurrency was a concept before it became a digital currency. The earliest thoughts about crypto were applying mathematical and computer science principles to solve issues with traditional fiat currencies like the dollar. Now, crypto is becoming huge, as sports arenas are being sponsored by crypto companies, companies are giving crypto as unique benefits to employees and there are even city coins!
What is Cryptocurrency?
If you’re not an investor or follow pop culture, you may not understand cryptocurrency. Crypto is a type of payment that’s exchanged online for goods and services, much like regular money. However, it is decentralized, which means it is not controlled by any bank or government like the regular U.S. dollar or other types of fiat currencies.
Cryptocurrency coins are also called tokens which can be traded for anything online. However, as cryptocurrency stands, you’ll need to exchange your fiat currency for crypto to access digital goods and services.
Crypto uses a technology called blockchain, which is a decentralized technology run by many networks and computers. The blockchain manages all transactions and keeps records of them, offering unparalleled security.
Cryptocurrency History
While cryptocurrency might have taken off in the last few years, the technical foundations were laid decades in advance. Let’s discuss the history of crypto.
Before Bitcoin
The foundations of cryptocurrency can be traced back to the early 1980s when David Chaum, a cryptographer, invented an algorithm known as a blinding algorithm that is currently used for modern-day encryption.
The blind algorithm offers secure information exchanges, which is the foundation of cryptocurrency as electronic currency is transferred securely and is not altered in the process.
After the invention of the blinding algorithm, Wei Dai, a software engineer, published a paper about b-money, the architecture of virtual currency. This paper mentioned many of the current components of crypto, such as decentralization. B-money was never actually deployed, though.
Not soon after that, in the early 2000s, there was a rise of digital finance companies, such as PayPal. PayPal is one of the most widely known payment solutions available and was co-founded by cryptocurrency advocate and Tesla founder Elon Musk. While PayPal doesn’t currently deal in currency, it did pave the way for more consideration about currency in the digital age.
Bitcoin and Modern Crypto
There was no true cryptocurrency until Bitcoin emerged in the late 2000s. Bitcoin is considered the first cryptocurrency as it was the first to public exchange that combined decentralization, anonymity, scarcity, and blockchain record keeping.
Bitcoin was first mentioned in a paper published by an anonymous person or group under the pseudonym Satoshi Nakamoto in 2008. In 2009, Nakamoto released Bitcoin and people began exchanging and mining it. However, public exchanges didn’t happen until around 2010.
A few years later, there would be dozens of cryptos available, including Litecoin.
In 2012, WordPress began accepting Bitcoin payments along with other electronic relations, such as Microsoft, Expedia, and later Tesla. Many merchants currently accept BItcoin as a legitimate payment method.
Now, there are new emergency crypto applications every year, including crypto betting websites. Bitcoin remains one of the most widely accepted cryptocurrencies for merchant payments, but other types might soon become just as popular.
Since its inception, many investors have closely watched crypto, waiting for their opportunity to get in the game and make money with high-risk investments.
Top Cryptos
While Bitcoin paved the way for many types of cryptocurrencies, it has remained on top. Active currency numbers fluctuate, and values are highly volatile, but the market value is trending upward as more people get interested in the idea of decentralized currency. These are the top cryptocurrencies being traded and mined today.
Bitcoin
Bitcoin is the first cryptocurrency, which is why many people still trust it, and it’s the most widely used. Bitcoin is viewed as a legitimate currency exchange as many companies accept Bitcoin payments. Unfortunately, many of these companies must partner with exchanges to convert Bitcoin into dollars before they can get paid.
Ethereum
Ethereum is the second most well-known crypto and the second most valuable. Ethereum has improved upon the basic architecture of BItcoin by using smart contracts that enforce transactions. Smart contracts are an important part of the future of crypto to address the lack of refunds, but many experts still don’t know if they can completely solve the issue.
Litecoin
Litecoin was released in 2011, not long after Bitcoin emerged. It has the same basic architecture and structure as its predecessor but includes a higher programmed supply and shorter blockchain creation times. The algorithm also differs slightly from Bitcoin.
Ripple
Ripple was released in 2012 and includes a consensus ledger that speeds up transaction confirmations and blockchain creation times. Ripple can be converted to other cryptocurrencies with an exchange that can also convert tokens into dollars, yen, euros, and other common fiat currencies.
Unfortunately, the downsides of Ripple are the network is more susceptible to hacker manipulation, and transactions aren’t as anonymous as Bitcoin.
Dogecoin
Dogecoin originally started as a joke but is a variation of Litecoin. It offers a shorter blockchain creation time and has a larger number of tokens in circulation. Dogecoin is inflationary crypto that experts watch closely to see how it performs long-term compared to other types of cryptocurrency.
The Future of Crypto
Cryptocurrency is expected to have more widespread adoption over time. There will be some changes along the way, but blockchain technology will continue to become more popular as more individuals learn about crypto.
Currently, crypto is on the minds of many large investment firms, including JP Morgan. While cryptocurrency investing is high-risk, it continues to gather worldwide interest and recognition.
Nobody knows for sure whether crypto will outperform traditional assets, but many agree Bitcoin isn’t going anywhere any time soon. There have been many debates about the value of crypto compared to other types of currency and whether crypto will be a long-term, viable solution. Investing in cryptocurrency is not something that should be taken lightly.
Your success depends on how much other people are willing to pay for tokens, which makes the market incredibly volatile. When it comes to crypto, you should never invest more than you’re willing to give up, because in some cases, you’ll never get your money back.
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