Cryptocurrency. It’s a word that might scare some people away at first, and for good reason. Cryptocurrency is a confusing topic, and even though I’ll barely be scratching the surface of what cryptocurrency is, it might still leave some people scratching their heads, so I’ll try to keep it easy to understand. Cryptocurrency, in its simplest form, is a currency that exists solely online and uses cryptography as a method of its security.
To break that definition down, cryptocurrency is just like any other currency you might have in your pocket right now, except instead of being a physical object you hold in your hand, it exists solely on a computer in the vast realm of cyberspace. The last part of that definition, “uses cryptography as a method of security”, means that regardless of whatever type of cryptocurrency you choose from (Bitcoin, Litecoin, etc), the method by which your money is encrypted is always through cryptography, which is what protects your money from being stolen, or from someone else claiming that your cryptocurrency is their’s, (i.e committing fraud).
Another thing that makes cryptocurrency different from a currency you might see everyday is something called the ‘block chain’. Essentially, the block chain is a long of list of every transaction of, for example, Bitcoin that has ever been made, which everyone that uses Bitcoin has a copy of. But why does cryptocurrency need a block chain? The reason that a system like this exists for Bitcoin is so that, since it is a solely virtual thing, people know how much everyone else has and can check to make sure someone isn’t lying about how much bitcoin they have. This also makes it so that ‘miners’, the people that go about verifying the block chain and keeping track of all of the transactions that take place, can earn more bitcoin in the process, as whenever a new block of transactions in placed on the chain, they are rewarded with bitcoin in return.
Now that you understand the basics of what cryptocurrency is, what is it that’s brought it so much into the news as of recently? One of the reasons cryptocurrency has gotten so big over the last year is the rise in the value of Bitcoin. Starting back in 2009, Bitcoin quickly became popular because of its previously unheard of system of the block chain, and the concept of cryptocurrency in general. Since then it has grown to be one of the biggest cryptocurrencies out there, with the value of one Bitcoin right now being worth upwards of $8,000.
Whether you’re for it or against it, cryptocurrency proves to be something that changes, better or for worse, every day, and offers plenty of insight for what the world of investing could look like in the future.