Bitcoin and cryptocurrency were introduced to most users sometime between 2013 and 2017, which was the period when it first saw its highest surges. The story of Bitcoin as we know it started in 2008 when Satoshi Nakamoto published the whitepaper in the wake of the financial crisis. However, it is remarkably still something of a mystery to regular people today. While most will have heard about cryptocurrency in one form or the other, a lot do not truly understand what it is and how it works. Today, we will do our best to tell you all of the most important facts about cryptocurrency and why you should know them.
What is cryptocurrency?
There are a lot of definitions out there so we will keep this simple Cryptocurrency is a digital currency, meaning it does not exist physically anywhere. It uses cryptography to regulate its own generation and in the verification of its transactions. It exists on a decentralised network, unlike with regular currency there is no single entity in control of it. Cryptocurrencies are not regulated by any government, bank, or singular entity rather they are monitored by users with the aid of the blockchain.
How did it begin?
A lot of people have made efforts to create cryptocurrency in the past and the reasons for this should be obvious in a world that also has the internet. They are forms of currency that transcend all physical borders and barriers, they are free from the limitations of any government, and are an efficient means of performing transactions using the internet. Cryptocurrencies require minor transactional fees, no third-party approval, and can be done instantly and securely.
The first person that managed to create a reliable cryptocurrency is Satoshi Nakamoto, a pseudonym for a single man, woman or a group of people. The biggest leap made over previous attempts is in the creation of a decentralised network, which uses a peer-to-peer review system to prevent the biggest problem faced by others, double spending. Cryptocurrencies are digital cash, so what is stopping any from simply duplicating what they have and using it in multiple transactions (double spending)? This is where the blockchain comes in, it’s a distributed ledger that carries details of every transaction. Each transaction is recognised by every peer in the system, before being validated and recorded. To make a second transaction using the same digital currency, you literally need to alter the record of every peer in the network, which could well exceed a million individual users. Satoshi Nakamoto created bitcoins, but many people hail the blockchain as his greatest invention.
Why do you hear about bitcoins, altcoins and blockchain?
As explained in the above entry, blockchain is the technology that makes cryptocurrency work. So whenever you hear cryptocurrency mentioned, you will definitely also hear about blockchain. However, blockchain is also used in a number of exciting ways that doesn’t involve regular transactions, investments or trading. Blockchain also serves as a way to share information over a wide decentralised network and can be used to store and share financial and medical records, create immutable contracts, form entirely decentralised social networks, share cloud storage, and in similarly exciting ways.
Bitcoin was the first workable form of cryptocurrency to go online. It quickly went global and is currently the most popular type of cryptocurrency available. Bitcoin is the standard for every cryptocurrency created and will remain so for some time. However, this does not necessarily mean it is the specific form of cryptocurrency a new investor must purchase. Each form of cryptocurrency has its own unique lifecycle, although experts may pinpoint the similarities faced by all. Most top forms of cryptocurrency hit a peak in value in 2017 and may do so again in later years, but they had a definite downward trend in 2018. Which cryptocurrency will do this again? Will it be bitcoins or one of the many altcoins? The future will definitely tell.
The word altcoin will be confusing for some. You will definitely come across it, but the meaning might escape you. In a way, the word altcoin is indicative of just how big bitcoin is in the industry. Altcoin basically means “alternative to bitcoins”, and this refers to any of the other 1,500 types of cryptocurrencies out there. The most important of these are:
- Bitcoin Cash (BCH): An offshoot of bitcoin created in 2017. BCH is currently suggested to have as many coins in circulation as bitcoin. However, BCH forked recently to give off Bitcoin Cash ABC and Bitcoin SV.
2. Ethereum (ETH): Currently the third biggest cryptocurrency behind bitcoin by market cap. It is largely considered a developer’s cryptocurrency as it offers users a starting point via the use of its own blockchain and 92 of the 100 tokens listed on coinmarketcap are built off Ethereum Blockchain.
3. Ripple (XRP): A spike of around 36,000% put ripple ahead of all other cryptocurrencies in 2017, in terms of growth. XRP is currently ranked the second highest cryptocurrency in the world after surpassing Ethereum in the recent downswing. It has made great strides in establishing itself as a viable payment method in the financial world.
4. Litecoin (LTC): LTC is the 8th largest cryptocurrency in the world, and like many others experienced a great upward trend in 2017. It has been able to complete transactions four times faster than bitcoin and has a greater maximum than bitcoin.
The above are considered as the most interesting altcoins in the world and will be present in any cryptocurrency trading exchange worth their salt. Other top cryptocurrencies are Dogecoin, BAT, NEO, Stellar (XLM), and Cardano (ADA). Worth mentioning is also Steem, a cryptocurrency that has seen significant interest in 2018.