22nd March 2018
The first cryptocurrency, created in 2009, was Bitcoin, which is now one of more than 1,000 available to purchase online. Bitcoin, in particular, has seen some tumultuous changes over the past six months, soaring up to $20,000 value at the end of 2017, before dramatically dropping to $8000 in 2018.
In basic terms, cryptocurrency is a digital medium of exchange. It was created to possess the capability to be exchanged, purchased and utilised for a number of services across investments and the buying and selling of products and services. The currency comes with no tangible form of currency linked to it, alongside offering no physical presence or attributes. The currency exists solely online and is controlled via a smartphone or computer. Cryptocurrency has been described as a P2P program, comparable to other file exchange and sharing programs, offering the user more control over their transaction.
Encryption is one of the core selling points of using cryptocurrency, with no two transactions between buyer and seller the same, removing the risk of ‘double spending’ from the equation. The currency works in a way which removes the potential of creating multiple or identical transactions alongside fraud risks. Transactions contain a private key, held only by the seller and a public key which is transmitted to the buyer. If a key is lost, the transaction will not be accessible.
Blockchains are the digital paper trail, recording all transactions completed using cryptocurrency. One of the key selling points for many is the anonymity associated with cryptocurrency, which is considered a benefit due to protecting the identity of those involved in the transaction. All currency purchased is stored in a secure digital wallet, which is required in order to make purchases, receive payments or store currency.
Cryptocurrency can be used in a similar way to other investments and currency. It can be simply kept to monitor the value growth or depletion over time. Some chose to invest it into other cryptocurrencies whilst others choose to sell it on. There is also a limited market for making purchases of goods and services, however, it can be traded with other parties. It is critical to do your homework before making any type of investment, including cryptocurrency, as this is considered as much of a gamble as traditional investments.