Cryptocurrency: the next step of money

With the evolution of modern economic aspects, tracking money was not only possible but also needed to follow trade and transactions. With the presence of the Internet, online shopping and e-commerce gained a new meaning and money transfer became virtual. First, the appearance of bank-issued credit cards made money more or less invisible to society, then a few years ago a new type of money was introduced to the world, called cryptocurrency.

What is cryptocurrency?

One can imagine cryptocurrency as a way of exchanging money by using cryptography to secure information throughout the transaction and to help maintain and create new units of the currency. Much like government-issued currencies, this money has a value and is valid to buy and exchange goods with it. Cryptocurrency provides a method for both issuing and tracking ownership of the representations of values, meaning that it is linked to its owner digitally unless it is programmed to do otherwise and change ownership status.

The system control and track each unit of its currency. Each individual unit is a piece of data moving around a network. Some cryptocurrencies are centralized, meaning they are controlled by a single identity, while others are decentralized, controlled by the public.

The brilliance of cryptocurrency is that they do not need a trusted 3rd party for monetary transactions. Cryptocurrencies use various timestamping schemes to verify the transactions added to the blockchain ledger. Blockchain allows consumers to connect to suppliers directly without the need of a middleman, like a bank, to make the transaction. It uses cryptography to keep exchanges secure, also it provides a decentralized database, or “digital ledger”, of transactions that is visible to everyone on the network. This network is basically a chain of computers that must all approve an exchange before it can be done.

Examples of cryptocurrencies

From online money, a clear majority of the people associate to Bitcoin, which is the first and most famous cryptocurrency. It is open to anyone as a cryptographic-backed public money supply. However, there are more than 1000 kind of different currencies currently circulating online. The different cryptocurrencies provide different values for the ones using them. Litecoin provides faster confirmation times than Bitcoin. Ethereum, which is a newer cryptocurrency, refers to itself as a crypto asset and use a native token to power a decentralized virtual machine that can execute peer-to-peer smart contracts. Other cryptocurrencies include Ripple, Bitshares, Factom, Dogecoin and many more.

Thinking about investing?

When the system launched in 2009, a bitcoin was less than a dollar worth. Later, conversion rates sky-rocketed and in 2014 a bitcoin was more than one thousand dollars. Currently the value is about half of that, but still, it is an impressive rate. High revenues made people interested in investing, and it caused a great desire to learn how to do so. However, high return means a great amount of risk included. One can purchase cryptocurrencies at many online providers, however, before you purchase cryptocurrency, make sure that you have a plan on how to store it. Without secure storing, one can easily lose it due to illegal mining activities, and then it cannot be taken back, so the investment goes up in the dust. Trading cryptocurrency is also possible online at trading servers.

As it is still less than a decade old investing and trading opportunity, the market is much smaller compared to traditional financial markets across the world. With online transactions gaining space, this new kind of money might just be the next big thing of the future.

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