Hi Guys and a happy Thursday to you! I am so happy seeing the early signs of spring in California. Although we are having another semi-dry winter, which could mean the California drought will continue, it also means longer days full of sunshine meant to be spent in gardens and beaches. Yes, you also may have noticed that I took a break from the blog yesterday just to relax. It wasn’t a day off and in fact, I was quite productive planning my blog calendar for the next couple of months. I also had to mentally prepare for today’s post because it tackles something I don’t have tremendous amount of experience in. Overall, not posting yesterday was a nice change of pace, where I focused on other tasks in hand. Moving on.
So cryptocurrency. I learned about this digital phenomenon several years ago during one of many in-depth conversations with my sister and her husband centralized around technology. Yes, my family is filled with engineers and doctors-surprise! And while other family members have focused on other engineering professions, my sister and her husband are purely computer and software engineers. So needless to say, I sometimes get the inside scoop of the latest technology on the market. Moving on.
What Is Cryptocurrency?
I will try to make this simple for my readers. Cryptocurrency is literally a digital currency (confused yet?) in which encryption techniques are used to regulate the GENERATION of units of currency and then VERIFY the transfer of funds, operating independently of a central bank. It is decentralized-meaning no ONE bank or government or company will be responsible for regulating cryptocurrency.
Also, it is not meant to be used as a credit card where you borrow money from the bank digitally to buy things and it is not like paper currency, which literally is paper served as means of exchange of goods.
A Little History, Shall We?
The first cryptocurrency to capture the public imagination was Bitcoin, which was launched in 2009 by an individual or group known under the pseudonym Satoshi Nakamoto. As of September 2015, there were over 14.6 million bitcoins in circulation with a total market value of $3.4 billion. Bitcoin’s success has spawned a number of competing cryptocurrencies, such as Litecoin, Namecoin and PPCoin.
There were failed attempts to have a digital currency since the 90’s. Few people know that Bitcoin emerged as a side product of another invention. Satoshi Nakamoto never intended to invent a currency. The single most important part of Satoshi’s invention was that he found a way to build a decentralized digital “cash” system.
How do Cryptocurrencies Work?
Cryptocurrencies make it easier to transfer funds between two parties in a transaction; these transfers are facilitated through the use of public and private keys (I am thinking encryptions) for security purposes. These fund transfers are done with minimal processing fees, allowing users to avoid the steep fees charged by most banks and financial institutions for wire transfers.
Weighing In The Risks And Benefits
Central to the genius of Bitcoin is the block chain it uses to store an online ledger of all the transactions that have ever been conducted using Bitcoins. This aspect does provide a data structure vulnerable to a limited threat from hackers and can be copied across all computers running Bitcoin software. How? Let me explain. The transaction is known almost immediately by the whole network. Also, confirmation is a critical concept in the block chain. You could even say that because of this block chain, cryptocurrencies are all about confirmation. As long as a transaction is unconfirmed, it is pending and can be forged. When a transaction is confirmed, it is set in stone. It is no longer forgeable, it can‘t be reversed, it is part of an immutable record of historical transactions: the block chain.
Also, another risk associated with cryptocurrencies are that they are virtual and do not have a central repository. A digital cryptocurrency balance can be wiped out by a computer crash if a backup copy of the holdings does not exist. Since prices are based on supply and demand, the rate at which a cryptocurrency can be exchanged for another currency can fluctuate widely.
The anonymous nature of cryptocurrency transactions makes them well-suited for a host of nefarious activities, such as money laundering and tax evasion.
However, many experts see this block chain as having important uses in technologies, such as online voting and crowdfunding, and major financial institutions such as JP Morgan Chase see potential in cryptocurrencies to lower transaction costs by making payment processing more efficient.
I think the foundation and principles cryptocurrency was built on is solid. I like the familiarity of the idea. Each digital dollar has an encryption that is original than any other like the code on actual dollar bills. I also like the fact that when you use crytocurency you will never have to use the same code or the same digital dollar again making any transaction safer and more secure than a credit card. Breakthrough? I think so too!!
The intention of this post is to educate you guys about cryptocurrency and where it stands today, not to give you advice on whether to use it or not. Ask yourself these questions the next time this topic is mentioned in news or social media:
1. Who are these so-called miners?
2. Think About This: How is cryptocurrency tied to the treasury department printing dollar currency? Does it interfere? Are companies the new banks?
I hope I have given you guys some questions to ponder on before you attempt to do anything with cryptocurrency. Yes, it is not 100% secure or safer than other currencies, but I like the idea of digital money in the 21st century.