Cryptocurrencies have become a global phenomenon.
Perceived variously as geeky, mysterious, and scary, the concept of cryptocurrency is not well understood, though many are aware of its growing importance.
Cryptocurrency is a medium of exchange like normal currencies, but designed for digital information transactions through a process of cryptography.
This method is used to secure transactions and control the creation of new ‘coins.’
The first cryptocurrency to be created was ‘Bitcoin’ in 2009.
Today there are many other cryptocurrencies, often referred to as ‘Altcoins,’ which continue to survive, although not as successful as Bitcoins.
Free sites such as www.coinhaunt.com provide latest prices of cryptocurrencies.
Bitcoin was developed by unknown person or persons called, ‘Satoshi Nakamoto.’
Nakamoto said in 2008 that ‘A Peer-to-Peer Electronic Cash System has been developed.”
But as the system was beginning to attract the IT world, Nakamoto vanished, and his forum posts and emails stopped.
How Bitcoin works
Bitcoin continues to soar in value.
Two weeks ago, one bitcoin was worth US$ 2.846 up from US$ 1.200 at the end of April.
Bitcoins are organised through a network known as ‘Blockchain,’ which is an online ledger that keeps a secure record of each transaction in one place.
When a bitcoin is bought or sold, the swap is logged.
No one controls these blocks, because the blockchain is decentralised. Each bitcoin wallet has a complicated unique identifier of 26-35 alphanumeric characters, which essentially acts as an ‘email address.’
However, unlike e-mail addresses, people have many different Bitcoin addresses and a unique address must be used for each transaction.
Bitcoin is also unique in that the number of BTC is currently capped at 21 million BTC.
The legal status of cryptocurrencies varies substantially from country to country and is still undefined or changing in many of them.
(To be continued)
Disclaimer: The above article does not constitute any type of financial and/or investment advice. The writer is an IT Lecturer and a passionate netizen. He is not a Registered Financial Advisor or legal professional. Please seek proper legal as well as financial advice before dealing with cryptocurrency.
Image Source: Wikimedia Commons