Are they the future of money?
The rapid rise in the price of bitcoin and other cryptocurrencies during the recent weeks has attracted the attention of investors, financial companies, regulators, and the media alike. Today, bitcoin is everywhere — in the news, in conversations, in the money market, even in ATMs. The cryptocurrency has gained so much attention that even the layman has his sights set on it. But beyond the noise and the press releases the overwhelming majority of people – even bankers, consultants, scientists, and developers – have a very limited knowledge about cryptocurrencies. They often fail to even understand the basic concepts.
While many have had their interest piqued, it can be challenging to understand the basics of bitcoin and other cryptocurrencies. There are a few reasons for that. First, there is a lot of technical language involved, particularly if you’re trying to understand how the software works. Also, many cryptocurrencies are experimental open-source projects and there is disagreement about how they should evolve among developers, miners, and early investors who have large holdings, and therefore a lot of influence. Then there is the issue that the concept alone challenges many people’s conventional notions of money. Cryptocurrencies have been called everything from the future of currency to outright scams and Ponzi schemes.
A cryptocurrency, also known as digital currency, is a digital or virtual currency that uses cryptography for security. It is just some lines of a computer code that hold monetary value. Those lines of code are created by electricity and high-performance computers. A cryptocurrency is difficult to counterfeit because of this security feature. This form of digital public money is created by painstaking mathematical computations and policed by millions of computer users called ‘miners’. Physically, there is nothing to hold.
A defining feature of a cryptocurrency, and arguably its most endearing allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation.
Bitcoin: The First cryptocurrency
The first cryptocurrency to capture the public imagination was Bitcoin. No one knows exactly who created it – cryptocurrencies are designed for maximum anonymity – but bitcoins first appeared in 2009 by an individual or group known under the pseudonym Satoshi Nakamoto who has since disappeared and left behind a Bitcoin fortune.
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