Bitcoin: Currency that doesn’t really exist, yet it does | Rogersville
In the early 1990’s, most of us were struggling to understand what the Internet even was, just discovering its uses and had no idea what the future held for it.
Some more clever folks, affectionately called “cypherpunks,” knew the internet had infinite possibilities, including breaking the hold that governments and corporations had on us. They wanted to give citizens more freedom and saw the possibility of having more control over our money and information.
Job number one for the cypherpunks was developing digital cash. They tried a couple ideas they called “DigiCash” and “Cybercash.” Unfortunately, although both ideas had merit, they failed by the end of the nineties. They had planted the seed though, and that seed grew into the first and probably most widely recognized type of cryptocurrency called Bitcoin.
In 2009, Bitcoin became the first fully decentralized digital cash system, created by an entity calling itself Satoshi Nakamoto. I call it an entity because no one really knows who or what Satoshi Nakamoto is, only ever speaking on forums and emails and never really saying who, or what, they were.
On Jan. 12, 2009, Satoshi Nakamoto made the first Bitcoin transaction when 10 Bitcoin (BTC) was sent to another computer coder named Hal Finney. By 2011, Nakamoto was gone and never heard from again, at least by that name, but left behind was the world’s first cryptocurrency.
In April of 2011, one Bitcoin was worth one US dollar. As I’m writing this, today one BTC is worth $44,610.89 and fluctuating by the second. So not only is Bitcoin and other cryptocurrency a method of exchanging money that is not controlled by any bank or government, but it’s also something a lot of investors look at like any other stock. It can make money; it can lose money. And like I usually say, anything is worth only what people are willing to pay for it. Apparently, people are willing to pay a lot for Bitcoin. Wouldn’t it have been nice to have bought a thousand BTC when it was one dollar? It would be worth over $4.5 million today!
So, if you’re not confused yet about cryptocurrency, let’s add another idea that you need to be aware of that’s also hard to wrap your arms around. It’s called Blockchain.
Simply put, Blockchain is a database of every transaction ever made using a particular version of cryptocurrency. Baffles the mind, doesn’t it? Once information is added to the Blockchain it can’t be deleted or changed, and it’s all stored on a network of thousands of computers called “nodes.”
If you’re interested in jumping into the fray that is cryptocurrency, you’ll need to know what it must be before it’s officially designated as such. It must be:
Digital: Cryptocurrency only exists on computers. There are no coins and no notes. There are no reserves for crypto in Fort Knox or any other physical location.
Decentralized: Cryptocurrencies don’t have a central computer or server. They are distributed across a network of thousands of computers. Networks without a central server are called decentralized networks.
Peer-to-Peer: Cryptocurrencies are passed from person to person online. Users deal with each other directly. There are no “trusted third parties” like banks, or PayPal.
Pseudonymous: This means that you don’t have to give any personal information to own and use cryptocurrency. There are no rules about who can own or use cryptocurrencies.
Trustless: No trusted third parties means that users don’t have to trust the system for it to work. Users are always in complete control of their money and information.
Encrypted: Each user has special codes that stop their information from being accessed by other users. This is called cryptography and it’s nearly impossible to hack. It’s also where the crypto part of the crypto definition comes from. Crypto means hidden. When information is hidden with cryptography, it is encrypted.
Global: Countries have their own currencies called fiat currencies. Sending fiat currencies around the world is difficult. Cryptocurrencies can be sent all over the world easily. Cryptocurrencies are currencies without borders!
Not needing a third party to handle accounts and transactions has a lot of benefits. Transactions can be faster and cheaper since there is no middleman. Plus, your personal information becomes more private since no bank has to store it.
Unlike traditional forms of money, there are no physical cryptocurrencies. No dollar bills, no metal coins, no plastic cards – it’s 100% digital. Everything is done from phones and computers. This allows for fast and cheap transactions around the world and around the clock.
Think of cryptocurrencies as a newer type of money. They store and transfer value, just like money, but they do it more safely, quickly, and efficiently. This is what makes them so useful and valuable.
But I hear you asking, “How do I get my hands on some of that crypto stuff?” Well, there are several ways if you’re brave. You can buy bitcoin with the Fintech Zoom wallet, from the Fintech Zoom website, from a centralized cryptocurrency exchange, or use a peer-to-peer trading platform just to name a few. And don’t think you have to be in it for thousands of dollars, because you can buy it in fractions and have less than one BTC for only part of the cost of one.
Anybody is allowed to create their own cryptocurrency. In fact, there are already over 1,500 different ones, and that number is growing quickly. People are developing new cryptocurrencies for fun, to solve problems, and to make money. Because anybody with some technical skills can make them, it’s important to know that some cryptocurrencies are more trustworthy than others and are only as good as the willingness of the other party to accept your transaction.
I wish you much success in your venture into cryptocurrency. I’ll probably just sit on the sidelines and watch, dreaming of the day where I should have invested in it when it first came out.