The Necessity That Created Cryptocurrency

One of the reasons why cryptocurrency had to be invented revolves around the issue of trust. Whenever you make a transaction with your credit card, you are putting your trust in a third party such as a bank. The bank has the power to stop the transaction. The bank also collect your sensitive data in the process of facilitating your transaction. This means that if the bank got hacked, then the hackers get away with a lot of your information that can be used for phishing or identity scams.

What if there was a secure way of doing away with the third party? That pregnant question gave birth to cryptocurrencies, which started with Bitcoin, in 2008. Cryptocurrency is both secure and anonymous, which a good selling point in this world where every online service wants to collect your private data.

Cryptocurrency created a new trustble, viable and usable currency that effectively factored out the middle man from a transaction. Cryptocurrency means that the users no longer have to put their trust in a third party, such as a bank or a government, to be certain that their money is going where it needs to go.

To filter out the third parties, cryptocurrencies uses a decentralised computer program based on the blockchain technology.

Though cryptocurrency is safe and secure, due to the blockchain technology, ordinary people took long to trust it. Partly because it is intangible. We are conditioned to view money as something that has to be tangible. Something that you can hold and see, like a coin or banknote but cryptocurrency has no physical representation. You cryptocurrency wallet can be in your harddrive right now.

Though intangible, cryptocurrency mimics almost all the important properties of cash. For example,

  • you can spend it only once.
  • it is transferable.

Besides cryptocurrency, there are other forms in intangible money that we are using right now. For example credit cards. Now, here is how cryptocurrency differs from the credit card system. Credit card balance is a digital representation of your money stored by a bank, whilst cryptocurrency is a digital representation of stored by yourself. When you make a transaction using a credit card, the bank facilitates the transaction and adjusts your balance accordingly. No tangible money actually exchanges hands. With Bitcoin technology, when you make a transaction, the money goes directly to that person, without passing through any bank.

The elimination of the third party in cryptocurrency means that the transactions are virtually free. No third party paperwork involved, only the addition of the transaction to a blockchain of data.

There are so many benefits of using cryptocurrency, that it would be rash to simply brush aside such an innovation without really understanding it. For example, cryptocurrency allows anyone to send money anywhere in the world in an instant, with virtually no fees involved. It is opensource, which means everyone can participate to the financial system. The fact that it is opensource and decentralised makes it easy to prevent fraud.

Bitcoin is the first of cryptocurrency the world was introduced to. Now we have thousands. Some of the most well-known of these include:

  • Dogecoin
  • Ethereum
  • Litecoin
  • Peercoin
  • Ripple.

Sydney Chako

Mathematics, Chemistry and Physics teacher at Sytech Learning Academy. From Junior Secondary School to Tertiary Level Engineering Mathematics and Engineering Science.

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